If you are anything like me; this last week featured a highly anticipated milestone. Finally ETH 2.0 phase 0 has officially launched. This updates the Ethereum protocol from being a proof-of-work protocol; to a proof-of-stake protocol. This also brings the ability to stake your own ETH to receive new ETH as a passive income. Over the last year I have become quite obsessed with the idea of growing my own passive income in hopes of retiring quickly and so of course I was very excited for this new Ethereum feature.
But at the moment there are both positives and negatives things about participating in ETH 2.0 staking and maybe it’s not the right moment for you to join in. Let’s talk about it!
Well first let’s talk about the great things that result in participating in phase 0. Like I mentioned before, by staking your ETH this allows you a way to earn a passive income on your cryptocurrency. And unlike many other coins that already offer staking services; many of which I believe don’t have much if a future. We are talking about Ethereum here, the number 2 cryptocurrency and arguably the crypto that has the most use and utility in the industry. Up until this point in the crypto market we have not seen such an easy way to earn staking on one of the “blue-chip” cryptocurrencies.
Also another great point going for it is that the interest rate rate is extremely generous. The reward rate expectations ranging from 5% to nearly 20%. If you do want to stake on your own, it does require that you have 32 ETH to stake. This is where things can become difficult. Owning 32 ETH has become an increasingly expensive objective and many people will not be able to achieve this goal on their own.
But for the people who do not own 32 ETH there is still another option for them to be able to stake their ETH. While there are options via joining rocket pool, the easiest way for most people would be through locking up their ETH at an exchange and staking there. All the while they would be charging you a staking fee that would be taken out of your rewards.
But there are two problems with this. The first problem is that when you are staking your eth into the ETH 2.0 protocol, it can not be unstaked until but Eth 1 and Eth 2 have merged into one chain. Which could take a few years or more perhaps. This means you could be unable to withdraw or sell for quite a lengthy period of time. And also because this new eth is locked up, you would not be able to participate in any defi during this process.
This has caused a personal dilemma for me. Which option is better; staking and locking up my ETH for years, but earning that very nice interest rate.
Or, keeping my ETH and lending it out to services like BlockFi and celsius. I would still be able to earn a passive income on my ETH, while it probably would be a much lower rate. But more importantly I would maintain the power or freedom over my own portfolio.
Fortunately I own enough ETH that I’ve decided that I will do both options. I will be both staking in the ETH 2.0 protocol, but also keeping some and lending that out as well.
But I think for a lot of people this is a really important decision that they need to really think about. People may not read the fine print and be very surprised that they will not be able to withdraw after locking up their coins for staking.
But what is your plan? Are you going to stake all of your ETH for that high interest rate while locking them up. Or will you wait until ETH 2.0 progresses further and just lend it out!?