As the popularity of Ethereum and other cryptocurrencies are increasing, many new ways of earnings are emerging from the same. And staking is one of the most popular things among them one can participate in. In the ETH network, one has to stake a minimum of 32 ETH to become a validator. After becoming a validator, one can validate the transactions, create new blocks, help in storing data, and more. And for doing all this, they receive rewards. This is similar to mining, but while the former is based on a proof-of-work system, it is based on the proof-of-stake system.
What is Ethereum Staking in detail?
Ethereum is currently based on a proof-of-work system. But slowly, it is moving towards the proof-of-staking system as the ETH 2.0 rolls out. In this network upgrade, there won’t be any miners. Instead, they will be replaced by validators whose work will be to store data, process transactions, create new blocks. Now to become a validator, one needs to stake a security deposit of ETH. This is to make sure that no malicious activity is done by the validator, as on suspicion, the stake will be seized. At the same time, there are some rules on the need to follow on staking.
First of all, you need to stay online and continuously process transactions. If one fails to do their job properly they could be penalized by deducting tokens from their stake. But staying up more than 50% of the time won’t cause any problems. One also needs to make sure that they don’t post anything negative about the ETH network, or they will be heavily penalized.
Keeping all that in mind, staking is a good way to generate passive income, and if you have some time and powerful PC components, you can generate a good amount of income from the same. It also helps in making the network secure, so that’s another plus.
Should you take part in staking?
It is a very easy question to answer. If you are well versed in the technology and think that yes, you can manage the technicalities of validating transactions and will be able to stay online for most of the time, then yes, you should take part in staking. Talking about staking in Ethereum 2.0, do note that if the network doesn’t take off, you might not be able to take off your stake. And also, until new upgrades are announced, the stake is locked in the ecosystem. So, it is a commitment you are giving to the network, which is why it’s important to think it through.
Anyone who is staking on Ethereum has a 100% belief in its future. If you are one of those, then yes, it is for you. Do note that while staking your ETH, you are not only enjoying the gains that ETH sees but also the extra rewards, so it’s a win-win situation.
What if I don’t have a minimum staking amount?
Well, most average investors don’t have an adequate staking amount to become a validator. And that is absolutely fine. For those, there are staking pools where many investors who want to stake their ETH do it in a group. There is a minimum amount here, too, but it’s attainable for almost anyone. This works similar to the staking that happens directly, but the rewards are a little less. At the same time, you don’t need to take part in any technicalities as it will be managed by the staking pool manager. It is an easy process, and if you have extra funds which you don’t need for a long time, this is a good option.
What are your thoughts on the risks and rewards that come with staking? And are you plan to put your ETH in a staking pool or become a validator directly? Let us know in the comments below. Also, if you found our content informative, do like it and share it with your friends.