Ethereum is currently the most used blockchain network in the world. The reason for this use case is the smart-contract-based applications called Decentralized Applications or DApps.
More than 2800 DApps are built on Ethereum, which accounts for more than 80% of total DApps globally. But, due to this enormous success and adoption, Ethereum is having a problem with scalability.
The network currently operates on the Proof of Work (PoW) consensus mechanism, due to which the current Transaction Per Second (TPS) is between 15-20 transactions. This TPS is significantly less for a network that has been adopted on such a large scale. Further, the transaction cost or the gas fee on the network is so high that it has become a bottleneck for the network’s further adoption.
Therefore, the Ethereum network is scheduled for its most significant update called Ethereum 2.0, which would shift the consensus mechanism from Proof of Work (PoW) to Proof of Stake (PoS). To know more about Proof of Work, Proof of Stake, and Staking, read our Staking Guide Here.
The upgrade would increase the TPS up to 100,000 transactions and reduce the transaction cost by 90-95%. Although the final merge of the main network with the PoS network is still pending, Ethereum 2.0 Beacon Chain was launched in December 2020. ETH Holders (Ether or ETH is the native token of Ethereum Network) can currently stake their ETH tokens on the Beacon Chain to earn staking rewards.
The most direct method of staking your ETH on the Ethereum network is becoming a Node Operator.
However, this method has its limitations, such as:
- You need to deposit 32 ETH or more to run a node on the network,
- You should have the technical, operational knowledge to run a node,
- You should have operational hardware to run a node,
- You cannot unstake ETH until the final ETH 2.0 merge is completed.
The next best alternative is to use a staking service that lets you stake your ETH simply and efficiently. Therefore, we have collated a list of the best staking platforms for your ETH tokens.
|Name of the Platform||Type||Fee for Ethereum Staking|
Mainly there are two types of staking platforms, Centralized and Decentralized. So, let us first understand the Centralized Staking Platforms.
Centralized Staking Platforms
Centralized staking platforms such as centralized crypto exchanges are the most used platforms for staking. The reason for this is the high existing user base of the platform and the user-friendly process of staking.
These platforms have their node operators who stake users’ funds on behalf of them. The node operators collect staking rewards, and exchange distributes them to the users after deducting their commission.
Now, let us understand the benefits and limitations of centralized staking platforms:
Pros and Cons of Centralized Staking Platforms
|These platforms are easy to use||These platforms keep the custody of users’ funds|
|There is no or very low minimum deposit limit of crypto. This means that even small investors can stake their assets.||Service fee is generally higher than the decentralized platforms.|
|There is no need to run a node on the network.||If a node operator misbehaves on the network, then slashing penalties will be imposed by the network on the operator, which will be passed on to the users who have staked their assets.|
Now, let us know the best-centralized staking platforms available in the market.
Coinbase is the biggest exchange in the United States based on trading volumes. Although the exchange is available globally, its userbase is more concentrated in the states. Read the detailed review of Coinbase here.
In addition, with the standard exchange services, the exchange also offers staking services to its users. An ETH holder on the exchange can stake their assets through the platform and earn an expected APR of 5%.
However, actual staking rewards may vary, and Coinbase would take its commission from the gross staking rewards. The exact rate of commission for ETH staking is not clear in the Coinbase User Agreement.
The next alternative staking platform is the Kraken Exchange.
Kraken is one of the top crypto exchanges in the world based on trading volume. Along with essential exchange services, Kraken also provides staking services.
The staking rewards are expected to be between 5-7% per annum after the commission, which is variable.
Once you stake your ETH tokens on the exchange, you would receive an ETH2.S token, a derivative token representing Ethereum tokens being staked. Now, this token can be traded on the exchange as a standard crypto token. Further, you would receive an ETH2 token, a derivative token to represent your staking rewards.
To know more about Kraken Ethereum Staking, click here.
Binance is the world’s no.1 crypto exchange based on the trading volume. Globally it has the maximum number of users and trading pairs.
In addition to exchange services, Binance also provides staking services, which we have mentioned earlier in our guide on best proof of stake cryptos. ETH tokens can be staked on Binance through the Binance Earn option.
Once you stake your ETH tokens on Binance, you would receive a BETH derivative token in a 1:1 ratio. BETH represents the ETH tokens staked on the network. Further, BETH can be traded on Binance as any standard crypto token.
The current APY for Ethereum Staking on Binance is 5.9%. To know more about Binance Ethereum 2.0 Staking, click here.
Now, let us understand the Decentralized Staking Platforms.
Decentralized Staking Service Providers
Decentralized Staking Platforms are Smart-Contract-based Decentralized Applications (DApps) that do not have a centralized authority. These platforms are solely established for providing staking services to the users.
These platforms are non-custodial and provide a securer method to stake your crypto assets. Further, these platforms are governed and managed through Decentralized Autonomous organisations (DAO) using an in-house governance token.
Now, let us understand the benefits and limitations of decentralized staking platforms:
Pros and Cons of Decentralized Staking Platforms
|These platforms are non-custodial. This means that a user has complete control of their funds.||These platforms are not very user-friendly in comparison with a centralized platform.|
|These platforms charge Low service fees.||As these platforms are smart-contract-based applications, a smart-contract hack may lose funds to the users.|
|There is no or very low minimum deposit limit of crypto. This means that even small investors can stake their assets.||If a node operator misbehaves on the network, then slashing penalties will be imposed by the network on the operator, which will be passed on to the users who have staked their assets.|
|There is no need to run a node on the network.|
|You can use hardware wallets with these platforms for better security of the transaction.|
Now, let us understand the best Decentralized Staking platforms in the market.
1. Lido Finance
Lido Finance is a Liquid Staking Platform that allows you to stake your Ethereum and provides you liquidity during the time in which your assets are staked on the platform.
When you stake your ETH on Lido, you get a derivative token called stETH (Staked ETH) which you can further use on several DeFi platforms for additional income.
- You can provide liquidity to stETH Liquidity pool on Curve and earn rewards,
- You can deposit stETH on Yearn Finance to maximize your yield,
- You can lend your stETH on AAVE and earn interest on it.,
- You can sell your stETH on 1Inch Exchange,
- You can convert your stETH to bETH and use it to borrow UST (Terra USD) on Anchor Protocol and earn a stable return of 20% p.a. on Anchor Protocol, and many more
Therefore, although the staking reward on ETH is around 5% per annum, your net return would be much higher than that. Lido takes 10% from your staking rewards as a service fee.
The platform is a smart-contract-based Decentralized Application (DApp) managed and governed by the LDO (the in-house token of Lido Finance) token holders.
For a more secure transaction experience, you can also connect Lido Finance with your hardware wallet, such as Ledger Nano X or you can directly use Ledger live app to access Lido.finance. You can watch this video guide to have a better understanding of staking ETH directly using Ledger Nano wallets.
The last platform on our list is Rocketpool.
Rocketpool is also a decentralized staking platform that is still under development. The testnet of the platform was launched on August 2, 2021, and the mainnet is expected to launch soon.
Similar to Lido Finance, Rocketpool issues a derivative token to the ETH stakers called rETH. The platform would take 10.76% out of staking rewards as a service fee.
The platform is a Decentralized Autonomous Organisation (DAO) managed and governed by its in-house token called RPL.
Once the mainnet is launched, we will test the platform and update this space ASAP.
Conclusion – Best Staking Platforms for Ethereum
Staking, for me, is one of the best sources of earning passive income on your crypto assets. If you are a beginner, then a centralized staking service would be best for you as it is easy to understand and use.
However, once you have a technical hold on how PoS blockchains work, using a decentralized staking service is most secure and rewarding. In the past, I have used Binance for staking Ethereum, but now I use only Lido Finance to stake my ETH on the network. You get complete custody of funds with the benefits of DeFi apps that you can use to earn additional income.
I hope this post would help you decide the right platform for you to stake your ETH tokens. Let us know your feedback in the comments section below. For more such articles, subscribe to the CoinSutra newsletter.
Please note that I am not a financial advisor, and this is not financial advice. Please consult your financial advisor before making any investment or financial decision.
About Harsh Agrawal :
An award-winning blogger with a track record of 14+ years. He has a background in both finance and technology and holds professional qualifications in Information technology.
An international speaker and author who believes in blockchain and the crypto world.
Join us via email and social channels to get the latest updates straight to your inbox.
Harsh has experience of 12+ years in Fintech and 7+ years in Blockchain and Bitcoin. He has also moderated the panel of Blockchain experts and attended international blockchain events like BTCMiami, and Token2049.