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Ethereum’s proof of stake consensus mechanism has given rise to a thriving sector of opportunity. The design offers significant improvements over the network’s former proof of work architecture.
Rather than using miners to confirm new transaction blocks, anyone can stake ETH to help secure the Ethereum blockchain. In addition to being far more inclusive than proof of work, proof of stake consumes far less energy and allows the network to scale much faster.
Users can choose from a number of avenues to stake ETH and earn rewards. However, these methods have varying requirements, from the amount of ETH needed to technical considerations. The following sections contain all the information you need to kickstart your ETH staking journey effectively.
Under proof of work, miners competed to solve increasingly difficult algorithms to mine new transaction blocks. The successful miner would receive block rewards in the form of ETH.
This method consumed massive amounts of energy and caused major network congestion. In contrast, proof of stake is far more scalable and uses >99% less energy.
In place of miners, ETH staking uses validator nodes to execute new transactions. Nodes conduct different activities to process transactions. First, a node proposes a new block of transactions. A selection of validators verify the validity of these transactions through attestation. Finally, the block is confirmed and broadcasted to the network.
Nodes earn block rewards for participating in these roles actively. Running a validator node is a serious responsibility. Ethereum slashes any nodes that break rules or act maliciously to protect Ethereum’s security. This means that nodes that go offline or fail to install updates promptly can be penalized heavily.
Running a validator is best suited for technical users with a long-term commitment to Ethereum’s success. Most users opt to stake ETH to these nodes to earn higher staking rewards than with liquid staking.
Stakers who delegate ETH to validators earn rewards derived from network transaction fees and token emissions. Known as gas fees, these fees are paid by Ethereum’s users to execute transactions on the network.
While running a validator node can offer stakers increased autonomy and heightened rewards, this method carries a high barrier to entry. Users need to stake 32 ETH to the smart contract to set up and run a node. Furthermore, node operators need vast technical expertise to run their nodes optimally.
As a result, many investors choose to delegate ETH through liquid staking services, which offer far more freedom and flexibility. Liquid staking platforms empower anyone to stake ETH with minimal thresholds and easier access.
Staking Ethereum directly via the smart contract can be a rewarding experience for users committed to the network’s long term success. However, the capital required makes it difficult for most stakers to run their own nodes.
Solo stakers need to deposit 32 ETH to run a node, which equates to more than $100K at the time of writing. This ETH is locked in the contract while the node is running, making it hard to access funds quickly.
Validator nodes should be run on dedicated computers or servers. This means that node operators also need to invest in hardware.
Beyond this upfront investment, validators need to monitor their nodes constantly to avoid slashing. Solo stakers should be aware that running a node improperly can result in losing their hard earned ETH. These risks can be mitigated by ensuring that nodes have backup power supplies and stable internet connections.
Launched in 2021, Rocket Pool is a leading liquid staking platform designed to lower ETH staking’s high barriers to entry. Unlike competitors, Rocket Pool also allows stakers to run their own validator nodes with a far lower minimum investment than solo staking.
Rocket Pool users can set up their own validator nodes by depositing only 8 ETH to a mini pool. The protocol puts up the remaining 24 ETH needed for a solo node. Alongside this ETH, node operators must also deposit collateral in the form of RPL, the protocol’s governance token. At minimum, users should deposit 2.4 ETH of RPL to run a node on Rocket Pool.
This approach is far more forgiving than solo staking. Instead of locking up 32 ETH at once, users can start earning rewards by depositing a total of 10.4 ETH in assets.
However, running a node via Rocket Pool still requires taking on major responsibilities. Users committed to staking nodes still need to manage validator activities and avoid incidents of slashing. Those who run their nodes carefully can look forward to heightened ETH staking rewards.
In contrast to running a validator node, liquid staking ETH is a simple process with lucrative benefits. Liquid staking protocols stake deposited ETH to staking pools across multiple validators. As a result, users can stake as little as 0.01 ETH to participate.
While this threshold is very low, staking such small amounts of ETH may not be feasible. Given that ETH staking rewards offer 3-5% APYs, a 0.01 ETH deposit would only yield ~0.0005 ETH after a year of staking. Additionally, transaction fees on ETH regularly run higher than 0.01 ETH, meaning that fees could cost more than the capital being invested.
However, liquid staking services still offer the most attractive staking options for ordinary users.
These platforms issue users liquid staking tokens (LSTs) in exchange for their deposits. LSTs represent stakers’ deposited capital and accrued ETH staking rewards. Furthermore, these tokens generally maintain a peg to ETH, making it easy to transact them freely. With LSTs, stakers retain full control of their investments and do not need to worry about locking up their capital.
The success of leading liquid staking platforms evidences the large demand for LST solutions. Lido Finance has claimed a place as DeFi’s largest protocol, with more than $30B in total value locked (TVL).
A key issue has emerged alongside the growth of ETH staking adoption – yield compression. As more stakers enter the fray, yields decrease as the same pool of rewards is being split between a larger number of users. This issue shows no signs of slowing as the amount of ETH staked is set to grow significantly in coming years.
Launched in May 2023, Origin Ether (OETH) has been designed to tackle this issue head-on. Users can deposit ETH to mint OETH, a liquid staking token with enhanced yield-earning and peg-keeping abilities. Beyond staking yield, the protocol’s strategies deploy reserves of ETH to blue-chip DeFi protocols to generate enhanced yield for holders.
Users retain full control of their capital in the form of OETH, which can be transacted freely across DeFi. The protocol automatically compounds and distributes yield to holders’ wallets, saving users significant time and gas fees.
Beyond offering users a platform to compound ETH staking rewards, Origin Ether features unique mechanics focused on user empowerment. Specifically, the protocol is governed by Origin DeFi Governance (OGV). Holders can stake OGV for up to four years to enjoy rewards derived from a share of OETH’s protocol fees.
At the same time, stakers receive voting and economic rights in the form of veOGV. veOGV holders comprise the Origin DeFi DAO, which votes on proposals that determine the future of OETH.
Staking ETH can be a relatively low risk strategy to earn lucrative passive returns. While it's important to acknowledge that staking can carry risks such as slashing and counterparty concerns, choosing a robust platform can make staking a seamless and secure experience.
Using a decentralized platform like OETH offers a seamless gateway to ETH staking with heightened yields that rival and outpace solo staking. While centralized exchanges offer their own staking solutions, using custodial services can add an additional layer of risk. Unlike on-chain protocols, centralized services are highly opaque, making it difficult to monitor how funds are being used.
By harnessing OETH’s seamless mechanics, stakers can enjoy sustainable yield with full transparency and ironclad security.
Join the future of yield:
How much ETH do you need to stake?
The minimum amount of ETH required for staking varies according to the chosen platform and staking method. While validator nodes offer heightened rewards, operators need to lock up 32 ETH to run a node.
In contrast, users who opt to delegate ETH via liquid staking platforms can start staking with as little as 0.01 ETH.
Which ETH staking method earns the most rewards?
Validator nodes earn increased rewards in exchange for helping to confirm new transaction blocks. However, Origin Ether delivers similar, if not higher rewards. Stakers can earn heightened yield on OETH without any of the stress or barriers associated with running a node.
