With the release of Ethereum 2.0, you’re now able to earn about 6-8% interest per year by staking your Ethereum tokens. I’m a huge fan of earning interest on crypto, so naturally, I’ve been looking into what it takes to get started with staking Ethereum.
Unfortunately, there is one big requirement if you want to move your Ethereum to the new network and start staking it: you need to have at least 32 ETH. That’s almost $100,000 of cryptocurrency, if not more by the time you’re reading this!
So, I decided to look into what the options are if you want to stake Ethereum without having 32 ETH. I found three different solutions, all of which I’ll explain in this guide.
Method #1: Stake on Exchange
I think the easiest way to stake Ethereum without having the required 32 ETH is to sign up to an exchange which offers staking.
Right now, there are at least two really popular exchanges that offer this service: Binance and Kraken.
In both cases, you can deposit as much Ethereum as you want and immediately start staking. All of the hard work is taken care of for you, and there is no minimum token requirement.
The downside to this method is that you’re putting your tokens with a centralized entity. If they’re hacked, this could result in you losing all of your funds.
But one massive plus of staking your Ethereum on exchanges is that you can trade back-and-forth between staked and unstaked Ethereum. (Well, you can definitely do so on both Binance and Kraken.)
This means that you can sell your staked Ethereum if you want to, which is not possible with traditional staking methods. It also means that you can buy staked Ethereum at a small discount instead of staking it yourself.
At the time of writing, Binance’s representation of staked ETH, called BETH, can be purchased at a more than 6% discount:
Method #2: Use a Non-Custodial Staking Pool
If you’re not comfortable giving your ETH to an exchange to stake it for you, another great option is to use a non-custodial staking pool.
They’re called non-custodial staking pools because you still hold the keys to your cryptocurrency. This means you don’t have to worry about a centralized platform getting hacked or denying you access to your crypto.
Of course, there is the risk of an exploit in the staking pool’s protocol, which could lead you to lose your funds.
That’s why you should look for open-source solutions if you do decide to opt for a non-custodial staking pool. You can make sure you’re happy with how the protocol works, or at least read what other members of the ETH community think about it.
I’ll expand this article at some point with more information about the different options for staking pools, but for now, here are a few names to look into:
- Blox Staking
Method #3: Lend Out Your Ethereum
This third option is kind of cheating…
Staking on the Ethereum 2.0 network isn’t the only way to earn a return on your ETH tokens.
In fact, probably the most popular way to earn a return on your ETH is by lending it out. (Some people also call this staking.)
You can lend out your Ethereum on decentralized platforms like Compound and Aave, and on centralized platforms like BlockFi, Celsius, or Nexo.
The interest rates on decentralized platforms are incredibly low right now, from around 0.1% to 0.4%, so I don’t reccomend them.
But on BlockFi, you can earn a very respectable 4.5% a year on your first 15 ETH tokens. The Celsius rate is about 5-6% and the Nexo rate is about 6-8%.
Again, this isn’t really staking in the way most would understand it, but it’s still an awesome way to earn on your crypto!
The big benefit of lending out your Ethereum instead of staking on the 2.0 network is that you don’t have to lock it up: you can sell it whenever you want.
I know I said you can sell Ethereum that is staked on exchanges, but you do have to sell it at a discount. If there’s ever an issue with the ETH 2.0 network, you may have to sell at a large discount.
There are of course risks to lending out your crypto. The first and most obvious is that your loan might get defaulted on. To prevent against this, both centralized and decentralized platforms aim to overcollateralize all loans. Still, in case of a bad flash crash, there may be some loss of capital.
In addition to this, there is the custodial risk of putting your money with a centralized service (they could get hacked or deny you service), as well as the smart contract risk of a decentralized service.
Ethereum 2.0 offers an exciting new way to earn interest on your ETH: by staking it. Unfortunately, the platform requires you to have 32 ETH and lock it all up. For those without 32 ETH, the best solutions are to stake on an exchange, stake with a non-custodial pool, or lend your crypto out.
All three options have their pros and cons, and I would personally reccomend using a mix of the three depending on your own preferences.