How to Stake Ethereum on Coinbase

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How to Stake Ethereum on Coinbase
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There’s more than one way to make money through cryptocurrency investment. The simplest and most popular is to seek gains through old-fashioned appreciation. This is when you buy a cryptocurrency in the hope that it will increase in value over time and allow you to sell it for more than you bought it. But you can also put your crypto to work to earn passive income, which you can collect without ever selling your position, similar to how shareholders receive periodic payments from dividend stocks. By staking crypto, your digital assets can earn returns, just like money in your savings account earns interest.

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Bitcoin does not allow staking, but Ethereum, the world’s second largest cryptocurrency, does. Coinbase is the largest crypto exchange in America, so if you’re thinking of putting your crypto to work through staking, the most popular staking coin and the largest exchange in the country are good places to start.

Keep reading to find out how to stake Ethereum on Coinbase.

How do I start staking ETH on Coinbase?

To start staking ETH on Coinbase, you will need to create a Coinbase accountadd Ether (ETH) to your digital wallet and make sure you meet the exchanges residency requirements.

Signing up for Coinbase is a fairly simple process. You will need a government issued ID to prove you are at least 18 years old – Coinbase does not accept passport cards. You’ll also need an internet-connected phone or computer and an active phone number to begin the six-step registration process:

  1. Enter your information, read the terms of service and create an account
  2. Verify your email address
  3. Verify your phone number
  4. Add your personal information
  5. Verify Your Identity
  6. Link a payment method like bank account, debit card, PayPalGoogle Pay or Apple Pay

To start, you will need Ether in your digital wallet. Ether is the native coin of the Ethereum ecosystem. If you don’t already own ETH, you can make it simple by buying it directly on the Coinbase exchange.

It is important to note that Coinbase is available in most of the United States, but the exchange is not yet open to residents of Hawaii. It is available in New York, but residents of that state are prohibited from staking several cryptocurrencies, including ETH.

You can bet ETH on Coinbase everywhere else in the country.

Is Staking Your Ethereum Worth It?

By staking Ethereum, you are putting your ETH holdings to work to help improve and secure the Ethereum ecosystem for the public good. In exchange, punters receive rewards in the form of more ETH. You can think of staking as the crypto version of putting money into a interest-bearing bond Where CD. By agreeing to deposit your assets for a specific period, you earn a certain percentage return.

Before determining whether stake your ethereum worth it, you need to be aware of the different ways you can stake ETH and the potential risk involved. According to the Ethereum system’s own literature, there are four ways to stake ETH:

  • Solo home staking: This form of staking has the greatest beneficial impact on the Ethereum network and pays all the rewards, but you need to own 32 ETH to start. It also carries the most risk and requires you to have a dedicated computer and enough technical know-how to run the software that aggregates transactions and validates the work of others. With this method, you have full control and get all the rewards, but your ETH is exposed and there are penalties for going offline.
  • Implementation as a service: This method still requires 32 ETH, but you don’t have to deal with any hardware as you mine the most complex work while collecting native block rewards. Unlike solo home staking, which is trustless, staking as a service requires you to entrust your keys to a third party. In most cases, you will be charged a fee and therefore earn less rewards.
  • Pooling: There are many pooling options, most of which involve “liquid staking”. With this easy and popular method, you receive liquidity tokens that represent your staked ETH. This method allows you to exit your position by selling your liquidity tokens without prematurely withdrawing your actual ETH.
  • Staking through centralized exchanges like Coinbase: This method removes your ETH holdings from your custody and hands them over to Coinbase or another cryptocurrency exchange, which consolidates large pools of staked ETH for many validators. The danger here is that these large pools are juicy targets for attackers and large points of failure vulnerable to bugs.

Is it worth staking your Ethereum on Coinbase?

Now that you understand your staking options, it’s time to decide if it’s worth staking your ETH on Coinbase specifically.

Coinbase has different requirements and uses different reward structures for different cryptocurrencies. While only you can decide if it’s worth it, the exchange’s policies regarding staking ETH are the most favorable of all. Coinbase allows staking with six cryptocurrencies, including ETH. The others are AlgorandCosmos, Tezos, gimbal and Solana.

The other five all come with minimum balance requirements, but not Ethereum. Additionally, the other five have delayed reward payment schedules. For example, the payout rate for rewards is three days for Tezos, five days for Cardano, and seven days for Cosmos and Solana. Algorand is the slowest of them all, only paying out rewards quarterly.

Ethereum rewards, on the other hand, are paid out daily.

How do I stake my Ethereum?

Unlike solo home staking, staking as a service, and bulk staking, staking your Ethereum on a centralized exchange like Coinbase is a quick and easy process that almost anyone can do. What is important to understand is that the moment you stake Ethereum on Coinbase, it turns into a different token.

When you stake Ethereum, it becomes Ethereum 2.0. ETH2 is an upgrade to the Ethereum ecosystem that improves both scalability and security on the network. The upgrade merges Ethereum mining modelknown as proof of work, to a staking model called proof of stake. Coinbase automatically converts staked ETH to ETH2. The price of ETH and ETH2 is identical and eventually both will merge into the same token.

In August, Coinbase began rolling out Coinbase Wrapped Staked ETH (cbETH), which the exchange describes as “a utility token representing the combined value of staked ETH and accrued ETH staking rewards.” Account holders can convert or wrap their ETH2 into cbETH without paying any fees, or they can use cbETH to earn returns in DeFi applications while continuing to earn ETH2 staking rewards.

How to bet on Coinbase?

To stake Coinbase, all you need to do is deposit any amount of Ether tokens into the Ethereum 2.0 network and Coinbase will automatically stake your holdings – but first you’ll have to queue by joining a waiting list. You must have a Coinbase account to join the waitlist, and Coinbase will notify you when you are removed from the waitlist and can begin staking ETH and earning rewards.

Although you can earn up to 5.75% cryptocurrency on Coinbase, the current Ethereum staking yield is 3.28%. However, the return may vary depending on the evolution of the amount of ETH staked on the exchange. That’s significantly less than what you’d earn with solo home staking, but the tradeoff is greater security and a much simpler process.

Know the risks before betting

As with all cryptocurrencies, Ethereum Price are notoriously volatile. When you stake ETH, the rewards you earn are paid out in ETH. This means that staking ETH is only a wise investment if you believe Ethereum will rise in value. Unless you trade them for a different cryptocurrency or cash them out, your primary investment and the reward return you earn on that investment is tied to the fate of the ETH token.

The potential risk goes beyond the simple Market volatility — your investment is directly related to the stability of the whole exchange. According to Coinbase, “ETH staking is experimental and carries certain risks, including possible network failure.”

ETH staking also carries the risk of so-called slashing, which is a penalty applied at the protocol level. Slashing – which can result in the loss of staked assets – can be caused by events beyond Coinbase’s control. Slashing and all other associated risks are described in the Coinbase User Agreement, which you must agree to before you can start staking. Read it carefully before you start. Finally, keep in mind that staking rewards over $600 are subject to tax declaration.

Information is accurate as of September 23, 2022.

Editorial note: This content is not provided by any entity covered by this article. Any opinions, analyses, criticisms, evaluations, or recommendations expressed in this article are those of the author alone and have not been reviewed, endorsed, or otherwise endorsed by any entity named in this article.

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