If you're interested in staking Ethereum on Coinbase, then this quick guide will get right to the basics and walk you through the process.
1. Make a Coinbase Account
Chances are you might already have a Coinbase account, but if you don't, you can set one up here. After creating an account, you'll need to verify it as well with your personal infromation.
Once you're all set with an account, move to step two
2. Buy Ethereum
If you want to stake Ethereum, you're going to need to buy Ether tokens. This can be done by buying the Ethereum tokens directly on Coinbase itself, or you can transfer in Ethereum tokens from another exchange.
Coinbase allows you to make market or limit orders for Ether tokens, each presenting their own benefits. Once you have your tokens, you can join the Coinbase waitlist. Coinbase has limited staking capabilities to certain people, meaning that you'll need to be a user with Ether tokens on hand, on the waitlist before you gain access.
If you want to start staking immediately, you can do so without a waitlist on Kraken.
3. Stake Ethereum
Coinbase runs the validator notes, so in order to begin staking after getting approved, is deposit an amount of Ether tokens to stake and Coinbase will take care of everything else. After staking your tokens on the Ethereum 2.0 network, you cryptocurrency holdings will start to earn interest without having to do any additional work.
Understanding Proof of Stake (PoS) and Proof of Work (PoW)
The Proof-of-Stake (PoS) algorithm is fundamentally different from the Proof-of-Work (PoW) concept. In PoS, instead of using computing power to solve complex cryptographic puzzles and having miners receive coins as rewards for their services, users are required to place bets on a node that will be selected as the next one to validate transactions and add entries to the public ledger. The essence of this approach is that those users who have invested more coins (stake) in nodes are motivated to act honestly since they will be able to lose their investment if they attempt any foul play.
PoS also introduces other advantages over PoW such as faster transaction processing times and lower costs since there is no need for specialized mining hardware. The main downside of PoS is that it is vulnerable to attack from users with a large stake in the system who may be able to control the node selection process.
Nevertheless, it has been proven to be one of the best options for managing cryptocurrencies and many well-known blockchain projects such as Ethereum have adopted PoS instead of PoW.
In Proof-of-Work (PoW), there is a competition between miners to solve complex cryptographic puzzles in order to add blocks to the public ledger. The main advantage of PoW is that it provides a high level of security since it is very difficult to tamper with the data that has been recorded on the blockchain.
However, PoW also has some disadvantages. For example, the process of mining can be very energy-intensive and it often requires specialized mining hardware which can be expensive. In addition, the competition between miners to add new blocks also results in high transaction processing times.
In the end, it is up to each individual project to decide which algorithm to use for its blockchain purposes. For example, Bitcoin continues to rely on PoW for validating transactions and adding entries to the public ledger since maintaining a secure network with high transaction processinghttps://ledgible.io/ speeds is a priority for them. Whereas Ethereum decided to adopt PoS because they recognized the need to improve on several aspects of blockchain technology and implement new features, such as smart contracts, which in turn require higher levels of speed and efficiency.
How much can you earn Staking on Coinbase?
On Coinbase, you can earn about 7% annually by staking your Ethereum, which is a pretty amazing interest in terms of traditional finance. The rate does fluctuate as more or less Ethereum is staked on the Ethereum 2.0 network, however. Another thing to note for crypto pros is that you'll earn about 25% less interest staking on Coinbase than you will by doing so independently - However many people prefer the ease of use that Coinbase provides.
What exchanges offer staking rewards?
To be able to stake your coins and take advantage of these relatively high-interest rates on crypto, you must utilize a digital exchange to make this transaction. Most major crypto exchanges will offer staking at the base rate that the specific blockchain offers; however, other exchanges will offer an overall interest rate while they handle the staking on the backend themselves. Kraken, Binance, Coinbase, Crypto.com and FTX are all major exchanges that offer staking with yields all the way up into the double digits on your crypto. At a base-level, most exchanges will offer USDC staking, as that is one of the most widespread and lucrative opportunities in crypto staking, but certain exchanges will broaden this to many other coins.
The Differences in Exchanges
Coinbase and many other exchanges will offer staking rewards that are on par with what the specific coin offers them. For example, you can expect to earn around a 6% annual yield on your Tezos coin while staking it on a major exchange. While this is great, USDC rates can even go upwards of 10% on some exchanges. For users who don’t want to deal with staking and re-staking their many coins within an exchange, FTX.US offers a unique solution.
While utilizing the FTX platform, you can switch on staking for all assets and they will give you 8% APY on all of your crypto, paid out by the minute. This means even coins that don’t utilize the proof staking algorithm are able to earn interest on their platform, from Bitcoin to dogecoin. This is a major advantage that can take a lot of micro-management away from the user. FTX also offers a free coin on every trade to help aid with the fees that are associated with trading.
Gemini earn is another crypto exchange with a slightly different solution. On their platform, users can lend their crypto to institutions for an agreed upon daily interest rate. These interest rates change based on demand, but can be a lucrative way to gain passive income through your free crypto. Kucoin has a similar model with peer-to-peer crypto lending that allows the user to set their preferred daily interest rate and wait for someone to come and take the offer.
