imToken will integrate the Eth2 staking service from InfStone natively. Please don’t forget to update to the last version of imToken wallet.
In the early of February, we summarized the current Eth 2.0 staking service on the market (review the article). Today, we classify the different solutions of Eth 2.0 staking service and briefly explain each type of solution’s advantages and disadvantages. Hope it can help you to choose the appropriate staking service.
Since the Ethernet 2.0 beacon chain launch on December 1, 2020, more than 400,000 validators have participated in Eth2 staking. It brings about 4% APR for validators and maintenance of the beacon chain.
At the Eth 2.0 phase 0 stage, there are 4 common staking solution:
- Self-run node: Users take full self-control for running the client of Eth1 and Eth2 to maintain their own node and receive the staking rewards.
- Full custody: A trusted custodian controls your funds, but it allows users to stake small amounts (less than 32 ETH) on it.
- Custodial staking pool: It offers custodial staking pool and token to reward users who are staking. Solution of Custodial staking pool provides the liquidity for ETH staking pool, which is based on the solution of full custody.
- Staking-as-a-Service custody: Users keep their asset of ETH and control of staking reward to jointly manage and verify nodes with service providers through 2 private keys.
The solution of a self-run node needs you to stake at least 32 Eth, while it also requires the technical skill, time and experience of node operational and validation. Participants receive the staking reward by continuous operation, with full control of their asset.
The self-run node allows users to completely control their asset, which removes the risk of centralized staking solution. However, professional technical skill and large staking standards block the ordinary users.
Staked, a US staking service provider, had two massive node slashes in February this year. The results cause nearly 100 validators being penalized and the public realize the high technical requirements of self-run nodes as well.
Solution of the Self-run node is geeks' niche in Eth 2.0 phase 0 stage, because it meets the decentralized validators expectation. The official guidelines for self-run node can be found at: https://launchpad.ethereum.org/
Users transfer their skating amount to a trusted custodian which operates and manages the validator on Eth 2.0, at the same time, the custodian extracts the revenue as service fee.
Users do not need to worry about validator's operation and maintenance, but they also lose their asset control when users staking it. The assets are centrally hosted, if a custodian has been attacked, the user's assets will be at risk, meanwhile, users are unable to know the staking details, like: Uptime of the validator,the level of revenue, penalties details… The user is not even sure whether their assets are used for staking, therefore the reputation and brand of custodian are extremely important.
Fully custody is provided by institutions with asset custody service, such as exchanges like Binance, Coinbase, Kraken, and some custodian/centralized wallets. It supports small amounts staking (less than 32 ETH), because custodians will gather their staking amount to reach the 32 ETH staking standard.
Custodial staking pool
Compared to full custody, custodial staking pools not only support small amount staking (less than 32 ETH), but also solve the liquidity problem that is caused by long-term lock-up staking. Custodians offer ERC20 token on Eth 1 as staking tokens for staker, while users stake on the pool. These staking tokens represent the user's staking revenue, which has the similar value with ETH on Eth 1 and also can be freely traded on the blockchain/trading market.
Common Eth2 staking pool token:
BETH - launched by Binance exchange on their Eth2 staking service
stETH - launch by Lido
aETH - launch by Ankr
vETH- launch by Bitfrost
Custodial staking pool is easy for users to operate and no need to worry about verifying node operations and maintenance. Meanwhile, the capital threshold is low which allows small amounts (less than 32 ETH) to participate and solve the liquidity of long-term ETH lockups.
But we should clearly know that the essential of custodial staking pool solutions is to rely on full custody, even custodial staking pool solution applied technologies, like multi-signature and smart contracts to try to manage assets in as decentralized a way as possible. The asset security, asset transparency, reward details and centralization are still needed to be aware.
Custodial staking pools solve liquidity issues, but also bring new issues and risks. Different staking pools utilize different algorithms that lead to higher understanding cost and discount on token. Staking pool token enhances DeFi's composability while also raising potential risk.
Staking-as-a-Service custody accepts users to keep control of their asset when they stake on Eth2.0. Compared to Self-run node, staking-as-a-service custody draws on the third-party node service provider to operate and maintain nodes and ensure the users' asset is self-controlled.
Each verification node in Eth2 staking service corresponds to two keys. One validator key is used to verify the blocks, and the other is the withdrawal key, for retrieving the staking deposit and revenue.
Unlike the full custody, with a self-run node and custodial staking pool, the validator key and the withdrawal key can be saved separately in the solution of staking-as-a-service custody. The withdrawal key is managed by the user within their decentralized wallet; while the validator key is imported into the node client by a third-party node service provider for node verification maintenance. Which shows the biggest advantage of the staking-as-a-service custody solution:
- Control and ownership of the assets are belong to user, and the service provider are unable to manipulate user's deposit and revenue
- Staking amounts reflect the validator node on chain, which is public and easier to track the online rate and revenue detail in real time.
Since users control the assets by themselves, the risk posed by third-party service providers is limited. In other words, the biggest potential loss comes from the offline penalty and slashed penalty that service providers may suffer during the node maintenance. When Eth2 enables withdrawal function in 2023 or later, users can retrieve the staking deposit and revenue at any time.
Staking-as-a-Service custody guarantees the ownership and control of users' assets extremely with transparent node information and no need to worry about node operation, node validation and maintenance services, although it is not fully decentralized and doesn’t provide small amount staking. Staking-as-a-Service custody is a good option for large asset holders with high security requirements to participate in Eth2 and obtain stable returns.
For now, InfStones, Staked.us, etc. are the common staking service provided who offer Staking-as-a-Service custody service.
At the end, if you want to participate in Eth2.0 staking,
- If your staking amount is less than 32 ETH, staking pools are recommended based on service provider brand, staking pool tokens and ETH discount.
- If your staking amount exceeds 32 ETH, with professional technical strength and node operation and maintenance experience, a self-run node is a good choice.
- If your assets exceed 32 ETH with high asset security requirements, but you do not want to spend your time on node operation and maintenance, Staking-as-a-Service custody is recommended.
At present, Eth 2.0 is still in the early stages, Eth2 staking market has huge growth potential. In the current Phase 0 stage, various staking solutions have different types of customer groups, therefore, finding an appropriate staking solution should consider the staking amount funds and the security.