The “Merge” is approaching, and ETH holders can stake their assets using solo staking, independent staking pools, liquid staking protocols, and centralized exchanges. While each method differs slightly from the others, they all have distinct advantages and disadvantages.
Ethereum Prepares for the Merge
Ethereum is about to complete “the Merge” to Proof-of-Stake, and ETH holders will have an opportunity to profit.
Following the Merge, the world’s second-largest blockchain will abandon its Proof-of-Work consensus mechanism in favour of Proof-of-Stake.
By abandoning Proof-of-Work, Ethereum will rely on validators rather than miners to validate transactions. By staking their assets, ETH holders can validate the network. They may receive yield in exchange for their services.
The Merge is currently scheduled to take place between September 13 and 15, but ETH holders already have several staking options.
This feature details the main ways ETH holders can stake their assets ahead of Ethereum’s landmark event.
Protocols for Liquid Staking
Liquid staking protocols are one of the most popular ways to stake ETH.
Today’s market leaders are Lido and Rocket Pool. Users can lock up their ETH and receive staked ETH tokens (stETH on Lido, rETH on Rocket Pool) representing their deposited assets.
It is simple to delegate ETH to liquid staking protocols; all you need is an Ethereum wallet.
Lido currently offers 3.8% APR for staking, while Rocket Pool offers 3.61% APR for staking and 4.84% for staking and running their own node. In comparison, solo staking on Ethereum currently yields approximately 4.1% APR.
The main advantage of liquid staking is receiving a liquid token. When users receive a staked ETH token in exchange for their deposit, they can use it in DeFi protocols to increase their yield.
Depositing Lido’s stETH in the yield strategy protocol Yearn Finance, for example, currently earns around 7% APR, bringing the overall yield to nearly 11%. Validators for liquid staking protocols such as Lido and Rocket Pool are carefully chosen.
To track the protocol’s staking performance, Lido maintains a whitelist of industry-leading staking providers and a community-owned scorecard.
Meanwhile, Rocket Pool has a policy that states that any losses incurred as a result of unreliable validators are shared across the Rocket Pool network to minimize the impact on single users.
To read our blog on “In the final pre-merge update, Ethereum completes Bellatrix,” click here