How to stake ETH: A complete guide on methods, risks, and rewards

Thinking of generating passive income through crypto, staking might be your answer. And while you may make a buck or two, you will also actively support the network’s security.  Since Ethereum shifted to a Proof-of-Stake (PoS) system, over 33.8 million ETH, about 27.6 percent of the total supply, has been staked. 

Too many concepts to decode? In this guide, you’ll learn how to stake ETH step by step, explore alternatives such as liquid and restaking, and understand how staking compares to traditional products, but before we get into the details, let’s first understand what exactly staking is.

What is staking?

Staking is a core part of how Proof-of-Stake (PoS) blockchains like Ethereum are built. In simple terms, you lock up your ETH to help validate transactions and secure the network, and in return, you earn rewards. One would say its just like earning interest had you kept your money in a traditional bank. But its not that simple. In the case of staking, you need to put your ETH into the network’s “piggy bank” so it can help run a portion of the Ethereum system, and get rewarded with yields. So you’re not just holding; you’re actively helping validate transactions and keeping the system secure.

Now, validators is another word to describe those who stake. To run your own Ethereum validator, you must stake 32 ETH. That puts you in control of a node and makes you eligible for staking rewards. Validators with 32 ETH are randomly chosen by the network; they have to verify transactions and add new blocks to the blockchain. In exchange for their work, they earn freshly minted ETH and portions of network transaction fees. And if 32 ETH seems a bit much, then alternatives like staking pools allow participation with smaller amounts too.

Setting up a crypto wallet

You can simply download and set up a non-custodial wallet like MetaMask, Trust Wallet, or Ledger (hardware wallet) to store your ETH securely. Ensure you back up your seed phrase and keep it private. Once this is done, you can go on to purchase ETH on any exchange like Coinbase, Binance, or Kraken, or through a peer-to-peer platform. Transfer the ETH to your wallet and ensure you have extra ETH to cover gas fees for transactions.

Choosing your staking method

You can choose from any of the 3 staking methods that are most suitable. First is Solo Staking, where you run your own validator node with 32 ETH. This requires technical expertise, a dedicated computer, and constant internet connectivity. For this, you are likely to install an ETH client like Geth or Nethermind, then a consensus client like Lighthouse or Prysm. You then generate validator keys securely. This can be done through hardware wallets. And the last step would be to use an official launchpad e.g. Launchpad.ethereum.org, to stake your 32 ETH

Secondly, there are staking pools, these are platforms like Lido, Rocket Pool, where you can stake smaller amounts of ETH. These pools aggregate funds and manage validators for you. For pools like Lido, connect your wallet to their website, select the amount of ETH to stake, and confirm the transaction. You’ll receive a liquid token stETH representing your staked ETH. This is a liquid staking, and you can use the token in DeFi while your ETH is staked.

Another option is Rocket Pool, which acts as a decentralized staking pool that allows as little as 0.01 ETH to be staked.

Finally, centralized exchanges like Coinbase, Binance, or Kraken offer user-friendly staking services, which is ideal for beginners.. Here, these platforms will handle validator setup and share rewards. There is a lower entry barrier, but you must be aware of provider risk and fees.

Monitor and manage rewards

Staking rewards are distributed periodically, which could be daily, weekly, or monthly, depending on the platform. Once your ETH is staked, you must track your rewards via the platform’s dashboard or your wallet. For solo staking, ensure your node remains online to avoid penalties.

Types of staking

• Liquid Staking: Platforms like Lido and Rocket Pool issue tokens (e.g., stETH, rETH) representing staked assets. These tokens can be traded or used in DeFi protocols, offering liquidity while earning rewards. However, they carry smart contract risks.
• Restaking: Introduced by platforms like EigenLayer, restaking allows staked ETH to secure additional protocols or services, potentially increasing rewards but also risks due to added complexity.
• Flexible Staking: Offered by some exchanges, this allows staking without locking funds for a fixed period. Withdrawals are quicker, but rewards are often lower than traditional staking.

Gauging your risks

As of March 2024, Ethereum staking yields ~3–5% APY for pools and up to 8% for solo validators, depending on network participation. Staking offers higher potential returns and inflation resistance but comes with volatility, technical risks, and smart contract vulnerabilities. One of the risks includes slashing, where solo stakers risk losing a portion of their ETH for downtime or malicious behavior, though penalties are typically small ~0.5–1 ETH.

Ethereum also gives you the option to unstake, through its Shanghai/Capella upgrade, which introduced withdrawable staking in April 2023. For pools and exchanges, you will have to follow their unstaking process, which may involve a waiting period of typically 1–7 days. Whereas solo stakers must submit a withdrawal request via their validator client.

With all the information available, whether you’re seeking passive income, supporting decentralization, or exploring DeFi opportunities, staking your ETH might just be your next smart move.