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After years in the making, Ethereum 2.0 is finally here.
Vitalik Buterin and co. have been teasing the network's switch to proof of stake since, well, the Ethereum ICO back in 2016. Even if the journey took several years and far longer than anyone expected — the important part is that it happened.
With the Ethereum 2.0 beacon chain set to go live within mere weeks, and the ETH 2.0 deposit contract already made public, all eyes have turned to ETH staking. As you probably already know, ETH 2.0 staking requires a minimum deposit of 32 ETH.
With Ethereum prices on the rise, 32 ETH costs a hefty $14K. If you're short of that amount, or don't want to part with 32 ETH, you still have staking options.
How? Easy — join an ETH 2.0 staking pool. Since staking is a relatively new concept, you may not know how they work. Jump to the next section to find out.
Ethereum staking pools explained
An Ethereum 2.0 staking pool lets you stake virtually any amount of ETH by joining forces with other stakers. Besides the significantly lower barrier to entry, you also avoid running your own node by joining a staking pool.
So, for smaller wallets or those who don't want to hassle with hardware requirements, staking pools present an excellent opportunity to yield returns on ETH without complications.
Ethereum staking pools do all the heavy lifting for you. After you allocate and deposit your ETH stake to the pool, the staking pool operators handle the technical aspects of running the node.
After depositing to the pool, your role is a pretty comfy one — just kick back and collect your ETH profits as they roll in.
The best Ethereum staking pool
Ask around about the best ETH staking pool, and pretty much everyone has the same answer — rocket pool.
The sheer amount of upvotes that the mere mention of rocket pool gets on Reddit are a little suspicious at first. That is until you realize that there is truly no other Ethereum staking service that comes close — yet.
Rocket pool is a decentralized ETH staking service that enables you to do three highly useful things:
- Stake 0.01 ETH or more in return for rETH, a tokenized version of your staked holdings.
- Run a validating node for 16 ETH rather than the 32 ETH minimum + earn higher APY
- Build your own staking pool using the rocket pool protocol
However, where rocket pool truly shines is in its rich feature set. Let's cover a few of the features that make rocket pool stand out, but here's a hint: Consensys, one of the largest names in the Ethereum world, is a rocket pool backer.
One of the biggest risks associated with staking ETH 2.0 is dishonesty. Let's say you allocate your stake to a pool operating a node. What happens when the node operators decide to sign off on malicious transactions? Their ETH stake gets slashed — meaning it's lost forever.
With rocket pool, if the node you're staking with acts in bad faith and gets slashed, the loss is soaked up across the entire pool, so you won't bear the brunt of it alone. Socializing the risk in this way puts less responsibility on your shoulders, and makes the potential for a loss more palatable.
Nothing about rocket pool is closed-door. Every aspect of the platform is built using public smart contracts that can be audited and upgraded as needed.
The advantage of using open-source smart contracts for a staking pool is clear. Outside auditors can verify the security of the pools, giving you more peace of mind about your ETH stake.
When you deposit ETH in the rocket pool contract, you get rETH in return. Tokenized rETh represents two things — your stake and your yield. As a token itself, rETH has the same characteristics as any ERC20 token, allowing you to secure it in cold storage, use it in DeFi products, or even sell its current + future value.
Two solid alternatives
With ETH 2.0 hype building to crazy levels, you'd be silly not to expect a whole plethora of options for getting some ETH yield. While rocket pool may be the best game in town, there are two solid alternatives worth checking out.
For high net worth stakers, Staked offers staking services with higher than average returns, infrastructure on par with the best investment funds, and non-custodial staking.
While Staked isn't an ETH 2.0 staking solution for retail users, professional investors will like the professionalism the platform offers. Apart from being able to depend on Staked nodes to perform honestly, you also get access to an ETH2 staking dashboard complete with an easy UI and web3 access.
Blockchain platform Ankr released an ETH 2.0 staking app called Stkr designed to make staking easy for anyone.
Similar to rocket pool, Stkr lets you stake any amount of ETH (yes, even less than the magic 32 ETH amount). Also similar to rocket pool, Stkr tokenizes your deposit with aETH, a move designed to address ETH 2.0 staking’s illiquidity problem.
Currently, anyone staking in the ETH 2.0 deposit contract has to deal with, presumably, a multi-year lock period. That's because ETH deposits won't unlock until the next phase of the ETH 2.0 rollout — but no one knows exactly when that will be.
With the liquidity enabled by tokenized aETH deposits, you continue using your staked ETH deposit’s locked value. Pretty nifty, right? Additionally, all of the Stkr magic happens directly from your Metamask wallet, making this a sweet non-custodial option for retail users.
If you've read this guide, you likely have your mind made up on the advantages and disadvantages of ETH 2.0 staking.
There is one point worth noting — the illiquidity issue raised by the ETH 2.0 deposit contract lock has been fixed by tokenized stakes available via rocket pool and Stkr.
Anyone on the fence about having their ETH locked up for an unknown period of time should be reassured by the liquidity regained by an rETH or aETH token.
In other words, if you believe in ETH long term, and wouldn't mind making more ETH with your current holdings while also supporting the network's transition, then using an ETH 2.0 staking pool is a no-brainer.