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Understanding Staking
Understanding Staking

Staking types, benefits, and risks

Katya Michaels avatar
Written by Katya Michaels
Updated over a week ago

Crypto staking is the process of depositing a cryptocurrency like ETH into a smart contract on a blockchain that uses a proof-of-stake consensus mechanism, for the purpose of supporting decentralized network operations and receiving crypto rewards in return.

In other words, when you stake your crypto, you make the blockchain more secure and more efficient. In exchange, you are rewarded with more assets from that network. The rewards vary depending on the blockchain, what assets you are staking, and through which provider.

How staking works

To generate staking rewards on a proof-of-stake blockchain like Ethereum, a node has to designate a certain amount of tokens on the network as a stake. This is similar to a safety deposit. The chance of that node being chosen to validate the next block is directly proportional to the number of tokens being staked, so the more tokens staked – the more rewards can be earned. A node can be maintained by a single user, or nodes can be run by staking providers, pooling stakes from multiple users.

If the node successfully validates a block, it is awarded the staking reward and part of the network transaction fees. This is similar to a miner being rewarded in proof-of-work chains like Bitcoin. Validators lose part of their stake (called 'slashing') if they approve a fraudulent transaction — this incentivizes them to only approve valid transactions. Staking allows you to participate in this reward system.

To learn more about Ethereum staking, see this help page.

Types of staking

There are many ways to stake ETH. You don't need to lock up a large chunk of your assets or have any technical knowledge to start participating and receiving rewards today.

Full validator staking

Full validators on Ethereum require 32 ETH. While this is a substantial amount, full validators also offer the highest return of rewards compared to all other staking methods. The good news is that you don't have to run your own node to stake a full validator!

On MEW, full validator staking is provided by Staked. Staked maintains and updates validators for you, so all you have to do is watch the rewards accumulate. See our guides to stake full validators on our MEW wallet app, or with MEW Portfolio using your preferred crypto wallet:

Partial staking

Partial staking is ETH staking without minimum. The provider pools stakes from multiple users to create full validators, and distributes the rewards to all stakers. Partial staking is the simplest way to start staking and earn rewards, and on MEW, it compounds automatically, making it truly low-maintenance for a beginner.

Partial ETH staking in MEW is powered by Coinbase. Check out the following guide to access this staking feature in MEW Portfolio using your favorite wallet:

Liquid staking

Liquid staking, like partial staking, has no minimum. The difference is that liquid staking providers issue a derivative token (LSD) to represent your stake. You can then use those derivative tokens in other decentralized finance (DeFi) applications. This way, you can collect staking rewards while still using your crypto for other earning opportunities.

Liquid staking is provided by Lido in MEW wallet iOS and Android. Please see the following guides for details:

Benefits of staking

  • Staking is one of the easiest and most low-risk ways of earning rewards on your crypto. Instead of just holding ETH in your wallet, you can have it work for you without any active maintenance.

  • When staking through services like Staked, Lido, or partial ETH staking powered by Coinbase, you don't need to have technical knowledge or engage in complex DeFi operations.

  • Staking is not like a bank deposit or a lending platform – your staked assets are never given to anyone else. Your ETH remains securely in a contract on the Ethereum blockchain and helps validate the network through a cryptographic process.

  • When staking with a self custody wallet like MEW, you remain in full control of your ETH, and can unstake and withdraw at any time.

  • Staking is an important way to participate in the crypto community and help keep the Ethereum ecosystem decentralized, secure, and sustainable. The more people and organizations stake on Ethereum – the more validators are working to keep the Ethereum blockchain running. Decentralization is all about avoiding single points of failure, and a wider validator network is exactly what's needed to keep Ethereum secure.

Risks involved

Any interaction with an evolving technology like the blockchain inherently involves risk.

ETH staking in MEW is provided by integrated providers. The provider maintains your stake and/or validator(s) for you. Very rarely, validators can incur penalties (known as slashing), and there can be delays in rewards distribution or staking withdrawals. As always, never risk more than you are prepared to lose.

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