Investors need at least 32 ETH to become a validator and stake funds on the blockchain – Photo: Shutterstock Content
- How to become a validator and earn ETH
- Staking Alternatives
The Ethereum merger, completed on September 15, has opened up new opportunities to monetize the cryptocurrency via staking as the blockchain fundamentally changes.
Ethereum’s move to proof-of-stake has left miners behind and swapped them for validators. This group is responsible for processing transactions and in return generates income.
At the time of writing, more than 14 million ETH are staked by more than 400,000 validators.
Currently, the annual percentage rate (APR) earned by staking ETH and validating transactions is 4.1%. However, there are several methods to access these earnings.
How to become a validator and earn ETH
To earn the APR yourself, investors need to lock up 32 ETH worth around $50,700 on the morning of September 15th. Users also need a dedicated computer that needs to be connected to the internet on a daily basis
However, various “staking as a service” options have become established. Services like BloxStaking, Kiln, and Abyss Finance have simplified the process for users.
Stakers are still required to lock the minimum of 32 ETH. But hardware doesn’t have to run all day, with the associated costs.
There are factors that investors need to consider as the services usually require cryptocurrency keys to be handed over.
According to the official Ethereum website, “This method of staking requires a certain level of trust in the provider. To limit counterparty risk, the keys to withdraw your ETH are usually held in your possession.”
Among the criteria stakers should check is whether the service is open source, vetted, permissionless, and uses self-custody.
Staking Alternatives
Not all staking methods require transactions to be processed, meaning higher APR rates are possible.
Prior to the move to proof-of-stake, liquidity pools were used by investors to generate passive income from their ether.
By lending ETH to these pools, investors have been able to earn returns from a variety of different third parties.
This method is usually more accessible with the required amount of just 0.01 ETH. However, investors need to be wary of the risks involved in lending cryptocurrencies to third parties.
The Ethereum website states, “There are many ways to participate in Ethereum staking. Targeting a wide range of users, these paths are ultimately all unique and vary in terms of risks, rewards, and assumptions of trust. Some are more decentralized, battle-hardened, and/or riskier than others.”
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