Ethereum is currently the most widely used blockchain network in the world. The reason for this use case is smart-contract-based applications called decentralized applications, or dApps.
More than 2800 DApps have been created on Ethereum, which is more than 80% of the total DApps globally. But, because of this huge success and adoption, Ethereum is facing scalability problems.
The network currently works on a Proof of Work (PoW) consensus mechanism, due to which the current transactions per second (TPS) ranges between 15-20 transactions. This TPS is very low for such a widely adopted network. Furthermore, the transaction costs or gas charges on the network are so high that it has become an impediment to the further adoption of the network.
Therefore, the Ethereum network is set for its most important update called Ethereum 2.0, which will move the consensus mechanism from Proof of Work (PoW) to Proof of Stake (PoS). To learn more about proof of work, proof of stake and staking, read our staking guide here.
The upgrade will increase TPS up to 100,000 transactions and reduce transaction costs by 90-95%. While the final merger of the mainnet with the PoS network is still pending, the Ethereum 2.0 Beacon Chain was launched in December 2020. ETH holders (ether or ETH being the native token of the Ethereum network) can currently stake their ETH tokens on the Beacon Chain. Staking to earn rewards.
The most direct way to stake your ETH on the Ethereum network is to become a node operator.
However, this method has its limitations, such as:
- You need to deposit 32 ETH or more to run a node on the network,
- You must have technical, operational knowledge to run node,
- You must have operational hardware to run node,
- You cannot stake ETH until the final ETH 2.0 merge is completed.
The next best option is to use a staking service that lets you stake your ETH simply and efficiently. Therefore, we have compiled a list of the best staking platforms for your ETH tokens.
There are mainly two types of staking platforms, centralized and decentralized. So, let us first understand the centralized staking platform.
Centralized Staking Platform
Centralized staking platforms such as centralized crypto exchanges are the most commonly used platforms for staking. This is because of the high existing user base of the platform and the user-friendly process of placing bets.
These platforms have their node operators who stake users’ funds on their behalf. Node operators collect staking rewards, and the exchange distributes them to users after deducting their commission.
Now, let’s understand the benefits and limitations of centralized staking platforms:
Pros and cons of centralized staking platforms
| professionals | Shortcoming |
| These platforms are easy to use | These platforms hold the custody of the users’ funds |
| Crypto has no minimum deposit limit or very little. This means that even small investors can stake their assets. | Service fees are usually higher than decentralized platforms. |
| There is no need to run a node on the network. | If a node operator misbehaves on the network, the network will deduct the penalty on the operator, which will be passed on to the users who have staked their assets. |
Now, let’s take a look at the best-centralized staking platform available in the market.
1. Coinbase
Coinbase is the largest exchange in the United States by trading volume. Although the exchange is available globally, its user base is more concentrated in the states. Read Coinbase’s detailed review here.
In addition, along with the standard exchange services, the exchange also provides staking services to its users. An ETH holder on the exchange can stake their assets through the platform and earn an expected APR of 5%.
However, actual staking rewards may vary, and Coinbase will take its commission from the gross staking prize. The exact rate of commission for ETH staking is not clear in coinbase user agreement.
The next alternative staking platform is Kraken Exchange.
2. Kraken
Kraken is one of the top crypto exchanges in the world based on trading volume. In addition to essential exchange services, Kraken also provides staking services.
The staking reward after commission is expected to be between 5-7% per annum, which is variable.
Once you stake your ETH token on the exchange, you will receive an ETH2.S token, which is a derivative token representing the Ethereum token. Now, this token can be traded on the exchange as a standard crypto token. In addition, you will receive an ETH2 token, a derivative token that will represent your staking rewards.
To know more about Kraken Ethereum Staking, Click Here.
3. Binance
Binance is the world’s number 1 crypto exchange based on trading volume. It has the maximum number of users and trading pairs globally.
In addition to exchange services, Binance also offers staking services, which we have mentioned earlier in our guide on the best proof of stake crypto. ETH tokens can be staked on Binance via the Binance Earn option.
Once you bet your ETH tokens on Binance, you will receive a BETH Derivative Token in the ratio of 1:1. BETH represents the ETH tokens that are staked on the network. ahead, BETH can be traded on Binance As with any standard crypto token.
The current APY on Binance for Ethereum is 5.9%. To know more about Binance Ethereum 2.0 Staking, Click Here.
Now, let’s understand the decentralized staking platform.
Decentralized Staking Service Provider
Decentralized staking platforms are smart-contract-based decentralized applications (DApps) that do not have centralized authority. These platforms are solely set up to provide staking services to the users.
These platforms are non-custodial and provide a secure way to stake your crypto assets. Furthermore, these platforms are governed and managed through Decentralized Autonomous Organizations (DAOs) using an in-house governance token.
Now, let’s understand the benefits and limitations of decentralized staking platforms:
Pros and cons of decentralized staking platforms
| professionals | Shortcoming |
| These platforms are non-custodial. This means that the user has complete control over his funds. | These platforms are not very user friendly as compared to centralized platforms. |
| These platforms charge low service charges. | Since these platforms are smart-contract-based applications, a smart-contract hack can cause users to lose money. |
| Crypto has no minimum deposit limit or very little. This means that even small investors can stake their assets. | If a node operator misbehaves on the network, the network will deduct the penalty on the operator, which will be passed on to the users who have staked their assets. |
| There is no need to run a node on the network. | |
| You can use hardware wallets with these platforms for better security of transactions. |
Now, let’s understand the best decentralized staking platform in the market.
1. Lido Finance
Lido Finance is a liquid staking platform that allows you to stake your Ethereum and provides you with liquidity during the time in which your assets are held on the platform.
When you bet your ETH on Lido, you get a derivative token called STETH (Stacked ETH), which you can use on many DeFi platforms for additional income.
for example:
- You can liquidate the stETH liquidity pool on the curve and earn rewards,
- You can deposit stETH on Year Finance to maximize your yield,
- You can lend your stETH on AAVE and earn interest on it.
- You can sell your stETH on 1Inch Exchange,
- You can convert your stETH to bETH and use it to borrow UST (Tera USD) on Anchor Protocol and earn stable returns of 20% p.a. on Anchor Protocol, and much more
So, although the staking reward on ETH is around 5% p.a., your net return will be much higher than that. Lido takes 10% off your staking rewards as a service fee.
The platform is a smart-contract-based decentralized application (DApp) managed and controlled by LDO (Lido Finance’s in-house token) token holders.
For a more secure transaction experience, you can also connect Lido Finance to your hardware wallet, such as the Ledger Nano X or you can directly use the Ledger Live app to access Lido.finance. You can do this watch this video guide To have a better understanding of how to bet ETH directly using the Ledger Nano Wallet.
The last platform on our list is Rocketpool.
2. Rocketpool
Rocketpool is also a decentralized staking platform that is still under development. NS testnet The platform was launched on August 2, 2021, and the mainnet is expected to launch soon.
Similar to Lido Finance, Rocketpool issues a derivative token called RETH to ETH stakers. The platform will charge 10.76% of the 10.76% staking rewards as a service fee.
The platform is a decentralized autonomous organization (DAO) managed and governed by its own in-house token called RPL.
Once the mainnet is launched, we will test the platform and update this space ASAP.
Conclusion – Best Staking Platform for Ethereum
For me, staking is one of the best sources of earning passive income on your crypto assets. If you are a beginner, then a centralized staking service would be best for you as it is easy to understand and use.
However, once you get a technical grasp on how PoS blockchains work, Using a decentralized staking service Maximum safe and rewarding. In the past, I have used Binance to stake Ethereum, but now I only use Lido Finance to stake my ETH on the network. You get full custody of the funds with the benefits of the DeFi app which you can use to earn additional income.
I hope this post helps you in deciding the right platform to stake your ETH tokens. Tell us your feedback in the comment section below. For more such articles, subscribe to the CoinSutra newsletter.
Please note that I am not a financial advisor, and this is not financial advice. Please consult your financial advisor before making any investment or financial decision.
Harsh Agarwal is the crypto exchange and bots expert for CoinSutra. He founded CoinSutra in 2016, and is one of the industry’s most respected professional bloggers in the fin-tech space.
An award winning blogger with a track record of 10+ years. He has a background in both finance and technology and holds professional qualifications in information technology.
An international speaker and writer who loves the blockchain and crypto world.
Learning about his background in decentralized finance and information technology, he made it his mission to help others learn and start it through CoinSutra.
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