Since the "Merge" in September 2022, Ethereum uses Proof of Stake instead of Proof of Work. This means: instead of energy-hungry miners, validators secure the network by depositing ETH as collateral. In return, they receive staking rewards — a form of yield on their ETH.
Staking is a cornerstone of the Ethereum ecosystem and offers you the opportunity to earn passive income with your ETH. Currently, the yield is approximately 3–4% APY — significantly more than most savings accounts.
How Does Staking Work?
When staking, you deposit ETH as collateral (stake). In return, you are selected as a validator to propose new blocks and confirm (attest) existing blocks. For correct work, you receive rewards. For misbehavior (e.g., being offline or contradictory attestations), you are penalized — this is called slashing.
Rewards come from three sources: consensus rewards (for validating blocks), execution rewards (priority fees from transactions), and potentially MEV rewards (Maximum Extractable Value).
The Three Paths to Staking
1. Solo Staking — Full Control
You run your own validator node. This requires at least 32 ETH (currently ~$60,000–100,000) plus a continuously running computer with a stable internet connection.
Pros: Maximum decentralization, no fees to third parties, full control over your ETH. You actively support network security.
Cons: High entry barrier (32 ETH), technical knowledge required, hardware and electricity costs, slashing risk with misconfiguration.
Software: Common clients include Lighthouse, Prysm, Teku, and Nimbus (consensus layer) plus Geth, Nethermind, and Besu (execution layer). You need one of each.
2. Liquid Staking — Stay Flexible
You stake your ETH through a protocol like Lido (stETH), Rocket Pool (rETH), or Coinbase (cbETH). In return, you receive a Liquid Staking Token (LST) representing your staked ETH share.
Pros: No 32 ETH minimum — you can stake any amount. Your LST can be used in DeFi (e.g., as collateral on Aave). You stay liquid.
Cons: Protocol risk (smart contract bugs), the LST may temporarily trade below ETH price (depeg risk), fees of 5–15% on rewards.
Recommendation: Rocket Pool (rETH) is more decentralized than Lido and has a solid security profile. Lido has the largest market share, which some view as a centralization risk.
3. Exchange Staking — Simplest Option
Exchanges like Coinbase, Kraken, or Binance offer staking as a service. You click "Stake" and you're done. The exchange handles everything.
Pros: Maximally simple, no technical knowledge needed, often possible from just a few dollars.
Cons: You give up control over your ETH (not your keys, not your coins). Higher fees (15–25% on rewards). Risk if the exchange becomes insolvent.
Staking Yields: What to Expect
Staking yield depends on the total amount of staked ETH. The more ETH staked, the lower the individual yield. Currently (February 2026), yields are approximately:
Solo Staking: ~3.5–4.5% APY (including MEV)
Liquid Staking (Lido): ~3.2–3.8% APY (after fees)
Exchange Staking: ~2.5–3.5% APY (after fees)
On top of this comes potential ETH price appreciation — but also the risk of a price decline.
Risks of Staking
Slashing: For misbehavior (double signing, extended offline periods), a portion of your ETH is seized as a penalty. With solo staking, the risk is yours; with liquid staking, the protocol bears the slashing risk.
Smart contract risk: Liquid staking protocols are based on smart contracts that can be hacked. Diversify across multiple protocols if you're staking larger amounts.
Price risk: Your yield is paid in ETH. If the ETH price falls, the fiat value of your rewards can decrease — even below zero in total.
Lock-up periods: Solo staking has a queue for deposits and withdrawals. Liquid staking solves this problem but has its own risks.
Who Should Stake?
Staking is suitable if you plan to hold ETH long-term and are willing to accept the risks. If you weren't planning to sell your ETH anyway, you can earn yield on the side — similar to interest on a savings account, but with significantly higher risk.
Solo staking is for technically savvy users with at least 32 ETH and the desire to actively strengthen the network.
Liquid staking is the sweet spot for most users: flexible, no minimum, more decentralized than exchanges.
Exchange staking is for absolute beginners seeking the simplest path and willing to give up control.