What is Ethereum Staking And How Do You Stake Your ETH?

Ethereum is switching to Proof of Stake some time this or next year (with all the delays, hard to set a date). The Casper protocol has been formalized, the specification is complete, and now the implementation phase can begin. Depending on how long it takes to implement and test may determine how it all plays out.

The question is will it actually be worth it to stake Ether in the first place? Will people be able to do it securely? And what should you do to be ready for the staking?

What is Ethereum Staking?

The Hybrid Casper FFG will reportedly combine Proof-of-Work with Proof-of-Stake (PoS) consensus, with the goal of eventually transitioning to PoS. According to the EIP, one of the specifications of the update reduces the block reward for miners to 0.6 ETH from the current 3 ETH (Decrease of block rewards by 80% over a year).
~5% yearly interest for anyone who wanna freeze $1mln (1500eth) in Casper.
4% finders fee for anyone who discovers bad actors (slashing).

The minimum staking requirement is set at 32 ethers.

One Redditor asked a question what should he do to be ready for the PoS on Ethereum and got a reply directly from Vitalik:

  1. Get enough ETH.
  2. Keep an eye out for testnets; they’ll start coming in a couple of months. Participate in them to get a feel for what validating will feel like in practice.

Vitalik was also asked about a new hardware device called NeverSlash, that aims to protects validator nodes from being slashed. NeverSlash encodes the slashing conditions of Casper FFG into a Raspberry Pi. Instead of manually checking whether their vote violates the slashing conditions, validators can rely on NeverSlash to prevent them from casting that vote at all.


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He called the device brilliant and expended on the whole idea of ethereum staking:

“The goal is to make staking highly accessible, as a default targeting laptops and ideally even phones (think used devices that you replace with new ones, that you then leave lying around your hope hooked up to a power source and home wifi).

The benefit of hardware devices like this is to provide an added layer of security; the hardware itself will just sign messages that your client provides, it will not be able to connect to the internet directly, the worst that it can do is require stop signing new messages, requiring you to log out and withdraw and re-deposit with a different key.”

How does ETH Staking Work?

Validators will need to run clients at a minimum and likely connect a beacon node to participate.

Your staked coins are held for a fixed term of 3, 6, 9, or 12 months in an Ethereum staking wallet that is in synch with a smart contract.

The amount of reward you will collect depends on the elapsed time – the longer you hold your coins in a staking wallet, the greater the reward will be.

The strength of the Ethereum staking network is commensurate to the amount of honestly staked ether. Staked coins are a sort of bond that vouches for the validity of new blocks. In exchange for this service, stakers/validators are being rewarded a fraction of the transaction fees on valid blocks. Casper confiscates staked ether in the event that a validator votes for an invalid block.

How much profit can I make from Ethereum staking?

Ethereum staking rewards will be earned on ether coins deposited in a smart contract on a validator node on the Ethereum Proof of Stake (PoS) blockchain network.

Profit from Staking = Validator Rewards + Network Fee

Validator Rewards — A reward for every block upon successful block creation.

Network Fee — Validators receive a cut of the transaction fees that people pay to use the network.

How do I stake my Ethereum?

The details are yet to be formally known as much of the rules of the new consensus are still being discussed. Even the number of ethers needed for staking is still not set in stone and is subject to change.

Whatever the number ends up being, ETH holders will be able to band together in “Ethereum staking pools.” – a similar joint enterprise as mining pools. You’ll pitch in your desired amount of ether, join your peers in locking it down, and rake in dividends that are shared in proportion to the size of the deposit of each member in the Ethereum staking pool.

The amount of ETH in your staking wallet will determine how large your dividends will be.

Coinbase Custody will stake ETH for you

Coinbase Custody will stake for you when the time comes to stake.

Our vision is to give customers the ability to participate in services like staking and protocol voting that are distinct to crypto. As the decentralized ecosystem advances, we expect there will be many more opportunities for customers to interact with digital assets in new and unique ways.

 

CaptainAltcoin's writers and guest post authors may or may not have a vested interest in any of the mentioned projects and businesses. None of the content on CaptainAltcoin is investment advice nor is it a replacement for advice from a certified financial planner. The views expressed in this article are those of the author and do not necessarily reflect the official policy or position of CaptainAltcoin.com

Phil Traugott is a staff writer at CaptainAltcoin. As a trained marketing specialist for copywriting and creative campaigns, he has been advising top companies on the following topics: online marketing, SEO and software branding for more than 10 years. The topic of crypto currencies is becoming increasingly important for companies and investors and he found it very alluring and fitting for his skillset which prompted him to pivot his career towards blockchain and cryptocurrencies.

2 Comments
  1. I am looking for the right wallet to use for staking – offline or online….please help me with a suggestion?
    I have read above , but i am asking this question regardless.

    I have tried the official wallet with Geth and Myst and they are really terrible / horrible componenst, for years they have been developed and they dont install easily NOR synch ,its really ridiculous

    • We have been looking into the wallet issue as well – there is no consensus in the community which wallet to use, YET. It will probably be just like with everything else: once the market shows the need for a good wallet, someone will swoop in and fill the void. So, some more patience and a better solution will pop out.

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