Ethereum Staking Yields: Maximize your ETH Returns

Woman holding cash

Summary: ETH staking is a great way to generate wealth with your Ethereum that would otherwise be sitting idle. In this article, we find the best rates for Ethereum staking, different staking strategies, and the myriad ways in which you can maximize your ETH returns.

Source APY Min. Stake Amount Staked Fee Type
Stake.fish 4.20% 32.0ETH 572,704 0.1ETH De-centralized
Staked.us 3.64% 32.0ETH 463,104 1.75% Centralized
Rocket Pool 2.94% 0.01ETH 384,416 15% De-centralized
Stakewise 3.44% 0.01ETH 73,280 10% De-centralized
Binance 1.23% 0.001ETH 1,012,864 5% Centralized
Uphold 4.25% 0.01ETH Unknown 15% Centralized
Kucoin 4.60% 0.01ETH 26,464 8% Centralized
Coinbase 2.67% None 2,071,424 25% Centralized
Kraken 6.00% 0.00001ETH 1,233,632 15% Centralized
Vesper 3.92% 0.01ETH 1,268 15% De-centralized
Aave 1.93% 0.01ETH 38,654 Variable (ETH gas fees) De-centralized
Lido 3.40% 0.0001ETH 4,857,824 10% De-centralized

We’ve talked at length about crypto staking–what it is, why you might want to do it, and the benefits (and pitfalls) of the practice. While there are a lot of different opportunities for staking in the crypto space, Ethereum is often touted as a solid, reliable way to generate wealth via crypto–for those ready to put up a stake and hold for the long term.

In this article, we’re covering one of the biggest staking chains on the market–Ethereum.

What is the highest staking yield on ETH?

Staking yields on ETH can fluctuate heavily based on factors like network activity, the amount of ETH staked at any time, and the total number of active validators on the network. Double-digit yields on staking ETH were quite common during the latest crypto bull run. However, after the bear market and crypto crash, the best ETH staking yields are usually in the high single digits, between 6% to 9% on average.

What is the average yield of staking?

For Ethereum, after the successful merge in 2023, the average staking yields fluctuated between 4% and 6%. But in optimal conditions, this figure can go above 10% as well. On average, crypto staking yields are generally superior to the yields from savings accounts and are comparable to US Treasury Bonds and AAA corporate bonds.

What Are the 4 Ways to Stake ETH for Yield?

In a Proof-of-Stake (PoS) blockchain network like Ethereum, a validator is a computer dedicated to maintaining the security and integrity of the entire system. To run a validator node on Ethereum 2.0, you must stake 32 ETH (roughly $50,000 at the time of this writing).

At least four ways crypto investors can stake their ETH on the Ethereum PoS blockchain. From billionaire crypto whales to first-time investors, there is an ETH staking option for everyone.

We’ll cover each option, with the difficulty level for each, as well as the “regulation risk” that the government will shut down.

1. Solo Staking Ethereum (Validator Node)

Difficulty level: High

Regulation risk: Low

The process of staking 32 ETH and running a validator node on your own is called solo staking. Along with the staked ETH, you will also need a reasonably high level of knowledge about network software and hardware maintenance.

Solo staking involves:

  1. Setting up a dedicated computer system.
  2. Running and syncing an execution layer client.
  3. Running and syncing a consensus layer client.
  4. Generating and managing your keys.
  5. Maintaining both the hardware and software of your node.

Solo staking is a major responsibility for the investor. But you are a full contributor to the Ethereum network and are rewarded a portion of the gas fees paid by those who use it.

Advantages of Solo Staking

  1. Earn more ETH without paying any fees to middlemen.
  2. Retain full control of your investment and wallet keys.
  3. Better for the long-term health of the Ethereum blockchain.

Disadvantages of Solo Staking

  1. Needs a high capital investment.
  2. Requires knowledge of blockchain and computer hardware.
  3. The burden of security (and uptime) rests on your shoulders alone.

2. Ethereum Staking-as-a-Service

Difficulty level: Medium

Regulation risk: Medium

Staking-as-a-Service is a business model where a third-party company runs a validator node on your behalf. All you have to do is provide the 32 ETH staking capital. The firm will handle your validator node's installation, programming, and maintenance for a fixed fee.

Staking-as-a-Service is an option if you have 32 ETH to spare but don’t have much knowledge and experience in configuring and running a validator node. You can delegate the technical tasks to the company while retaining control of your validator keys.

With the rise of ETH 2.0, many firms have started offering Staking-as-a-Service. Stake.Fish, featured on our shortlist, is one such firm that charges a flat commission of 0.1 ETH for its services.

To find the best staking-as-a-service firm, look for these features:

  • Uses 100% open-source code.
  • Provides formal auditing results of all essential code.
  • Has a bug bounty system to reduce the risk of vulnerabilities.
  • Service has undergone proper battle-testing.
  • There are KYC, account signup, or special permission requirements.
  • The company has a diverse array of independent validator clients.
  • You get full custody of all validator keys.

Staking-as-a-service is a model with clear advantages and weaknesses, depending mainly on your proficiency in the technical aspects of cryptocurrencies and blockchain networks.

Advantages of Staking-as-a-Service

  1. It’s beginner-friendly, with no need for advanced knowledge about blockchain.
  2. You don’t have to worry about security and network uptime.
  3. You still retain control of your investment via ownership of validator keys.
  4. You don’t have to invest money into IT hardware

Disadvantages of Staking-as-a-Service

  1. A percentage of your rewards will go to the company as service charges.
  2. The security of your investment is in the hands of a third party.
  3. You must handle the hassles of KYC and other signup formalities.

3. Pooled Ethereum Staking

Difficulty level: Low

Regulation risk: Low

Most crypto enthusiasts do not have the resources to run a solo validator node. The next best option is pooled staking: investors pool their money via pooling platforms. Once the pool reaches 32 ETH, the platform deploys it to activate a validator node and the members of the pool share in the rewards.

The important thing to keep in mind is that these staking pools exist outside the Ethereum blockchain. The majority of staking pools operate in a decentralized manner, with trustless and permissionless processes.

Importantly, this means regulators would have a hard time shutting them down.

Many of these platforms rely on smart contracts to operate the system. Some of them also provide native liquidity tokens to investors. These tokens act like shares, representing your stake in the pool.

Lido and RocketPool are two popular examples of decentralized pooled staking protocols for Ethereum.

Advantages of Pooled Staking

  1. Most protocols have very low deposit limits.
  2. No need to worry about setting up a node.
  3. Liquidity tokens can provide added value and rewards.
  4. You can hold liquidity tokens in your wallets.

Disadvantages of Pooled Staking

  1. You have to rely on third parties.
  2. You have no control over the validator nodes.
  3. Platforms often charge a flat fee out of your rewards.

4. Centralized Exchanges

Difficulty level: Low

Regulation risk: High

At the opposite end of solo staking, you have staking via centralized exchanges. Major crypto exchanges like Binance, Coinbase, and Crypto.com operate large staking pools that attract tens of millions of dollars from small investors.

While centralized exchanges offer a range of convenient features, they also retain full control of your invested ETH. You don’t have access to validator keys and enjoy none of the privileges of running a node alone.

From a long-term perspective, however, having a few powerful exchanges take control of multiple validators is probably not good for the health of the Ethereum PoS system. And they are at higher risk for regulators.

Advantages of Centralized Exchanges

  1. Gives access to staking for as low as 0.001 ETH.
  2. Requires minimal oversight or effort.
  3. You don’t have to hold funds in your wallet.

Disadvantages of Centralized Exchanges

  1. They may charge service fees and withdrawal fees.
  2. Centralized exchanges may have security risks.
  3. You have no power over the staking nodes.
  4. Honeypots for regulators.

What Should I Know About Staking ETH?

staking ethereum

Although the Ethereum Merge was completed successfully on September 15, 2022, it is not the end of the road. The blockchain will continue its evolution to scalability with multiple upgrades.

The first major step after the Merge was the Shanghai-Capella (Shapella) Upgrade, a hard fork that unlocked staked ETH. After the April 2023 upgrade, validators were allowed to withdraw tokens locked away since December 2020. This is a huge development for ETH staking, as shown in our explanation below.

After Shapella, the Ethereum roadmap includes plans for multiple major upgrades. Future upgrades will focus on strengthening the blockchain network security, reducing the high gas fees, and improving the overall user experience.

From a staking/investing perspective, the Shapella upgrade is probably the most monumental Ethereum upgrade for some years to come. The upgrade had the following long-term implications that you must consider if you are interested in ETH staking.

Unlocked Withdrawals and the Issue of Liquidity

An estimated $22 billion of ETH has been locked on the Ethereum 2.0 blockchain since December 2020. During the Merge, investors were not allowed to withdraw their staked ETH. The Shanghai upgrade changed that in April 2023.

Before 2023, if you invested money in a solo validator node, that money would have stayed locked indefinitely until the successful completion of the planned Shanghai upgrade.

Many investors found alternative ways to unlock liquidity through pooled staking and centralized exchanges. They allowed you to trade your liquidity token to withdraw your share of stake indirectly from the pool.

However, post-Shapella, you no longer have to worry about losing liquidity while staking ETH. You have the option to withdraw at any time. If you are an ETH holder, there is no longer any reason to hesitate about staking due to liquidity concerns.

Addressing Liquidity with Liquid Staking

Before the Merge, the potential loss of liquidity was a major pain point for ETH holders interested in staking. Third-party pooled staking service providers like Lido offered an alternative – liquid staking.

Users who stake their ETH through Lido receive a derivative token representing their staked assets. This token can be freely bought, sold, and deployed across other DeFi projects, allowing you to circumvent the locking requirements.

The Shapella upgrade was expected to reduce the need for liquid staking services like Lido. However, things have panned out differently since April – liquid staking is still incredibly popular, and Lido currently has ETH worth $14.15 billion staked through its pools.

While services like Lido and RocketPool make staking easier and more accessible, they also have some downsides. Consolidating staked ETH in a handful of entities is unhealthy for the network as it can increase the risk of security vulnerabilities. This was flagged by none other than Vitalik Buterin in a recent blog post.

Lower APY Post-Merge

Compared to returns of around 9% from late 2021, ETH staking rewards on many pools dropped to around 4.4% on average after the Merge. Things have remained largely the same nearly one year later, in 2023, even after the Shapella upgrade. There are several reasons for this:

  1. The macroeconomic situation worldwide has subdued demand for crypto.
  2. The on-chain activity remains low after a long crypto winter.
  3. Even more investors are creating validator nodes on Ethereum 2.0.

Crypto staking rewards are determined by a combination of factors, including on-chain activity, crypto prices, demand for the token, and the number of validators. With more validator nodes, the staking rewards will be spread thinner.

Post-Shapella, more investors are interested in creating validator nodes due to the absence of any lockup periods. The number of validators has nearly doubled from 430,000 to over 840,000 barely five months after the upgrade. This increase has played a key role in driving down the yield of ETH staking in recent quarters.

ETH is Now a Deflationary Asset

Before it transitioned to PoS, Ethereum was an inflationary asset as there was no limit on how many ETH tokens could be created.

However, multiple upgrades slowly added a burn feature to the network during the run-up to the Merge. After the Merge, the supply of new ETH is lower than the rate at which ETH is “burned off” with every transaction on the network.

With some tokens like bitcoin, being a deflationary asset has led to a massive increase in value due to its short and finite supply. We have not seen any price increase in Ethereum due to its switch to a deflationary nature.

The adverse market conditions may be responsible for such a reaction. However, this could easily change in the future. Provided Ethereum successfully maintains its rich ecosystem, the value of ETH could increase massively as supply decreases.

Investing in Future DeFi Potential

The current APY from ETH staking is comparable to US Treasuries, one of the most trusted investment assets on the planet. Yet the enthusiasm for ETH validator nodes has remained strong, even with a lock on withdrawals, because staking rewards are paid in ETH.

Investors are bullish on the unique position held by Ethereum in the wider crypto ecosystem. Most DeFi apps and smart contracts rely heavily on ERC-20 tokens. This technology is built almost entirely on Ethereum, making it a fundamental platform for the future of finance. Owning ETH, we believe, is like investing in the Ethereum “company.”

As economic conditions improve and further upgrades reduce ETH gas prices and improve scalability, staking rewards may see a huge jump. And the price of ETH may jump as well. You’ll never get that potential upside with US Treasuries.

Investor Takeaway: To Stake or Not to Stake?

We’re always looking for ways to put our investments to work. Ethereum staking is one of those ways, allowing you to take crypto and, with a slight impact on your liquidity, use it to generate potential returns.

But, because we believe Ethereum has a bright future, that impact is probably worth it for the patient hodlers out there. Staking is not a short-term investment, particularly with a long-term token like ETH.

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