Benzinga - Ethereum staking post Shanghai is being transformed, with the total number of staked ETH reaching all-time highs. Far from staked ETH leaving the network, it looks like existing validators are doubling down and new capital is coming into the market.
The increasing popularity of Ethereum staking is a positive sign for the network's security and decentralization, as it indicates that more users are invested in supporting the network.
Such vibrant growth of Ethereum staking also suggests that users are confident in the long-term prospects of the Ethereum blockchain and its ability to support decentralized applications and new financial instruments. With the increasing adoption of Ethereum staking, it's likely that we will see further growth in the total amount of ETH staked in the coming months and years.
This article compares solo staking to using a staking as a service provider. What are the differences in terms of earning potential and crucially, the user experience and how companies like Launchnodes make solo staking accessible.
Solo Staking Solo staking requires you to have 32 ETH or multiples of 32 ETH and involves setting up and running a full Ethereum node on your own computer or dedicated server. This allows you to directly participate in the validation of transactions on the Ethereum network and earn rewards for doing so. At a glance, solo staking needs you to boast a significant amount of technical knowledge and resources, but it also offers the greatest control, privacy and maximum staking returns.
Advantages of Solo Staking:
- Full Control: Solo staking gives you full control over your staked ETH and the rewards you earn. You can also decide when and how to vote on protocol changes.
- Privacy: Solo staking allows you to keep your Ethereum holdings and rewards private, as you are not relying on a third party to manage your funds.
- Security: By running your own full node, you have a direct and secure connection to the Ethereum network, reducing the risk of malicious attacks or theft.
- Higher Rewards: By staking directly, you keep the full rewards earned from validation (consensus and execution layer returns), without having to pay a fee to a staking service provider or exchange
When it comes to nodes and Launchnodes, not only does the company help non-technical users spin up their validator nodes, but it also let’s these nodes connect to a beacon node by default, which greatly cuts the costs of solo staking. Technical users can self-serve by using the guides that come with every type of a node, including valdator, beacon and geth.
Staking as a Service
Staking as a service is an alternative to solo staking where you delegate your staked ETH to a third-party service provider. This allows you to earn rewards from staking without the technical knowledge or resources required for solo staking. Staking as a service providers typically charge a fee for their services, which reduces the rewards earned by the staker. At the same time, you also get no control of your node and pass on the custody of your ETH holdings.
Advantages of Staking as a Service Providers and Liquid Staking Providers (LSD):
- You can do it with less than 32 ETH
- Ease of Use: LSD’s and Staking as a service are designed to be user-friendly, allowing anyone to participate in staking without the technical knowledge required for solo staking.
- Convenience: Staking services handle the technical aspects of staking, freeing up time and resources for the staker.
- Accessibility: Staking as a service provides access to staking for users who do not have the resources or technical knowledge for solo staking.
If you are lucky enough to have 32ETH or multiples thereof, there are some big and expensive downsides to using an LSD or a staking as a service provider.
The key ones are:
- Significantly reduced earning through commissions
- A lack of transparency on your earnings at the consensus and execution layer
- A lack of transparency on how your funds are mixed and technically separated from other customers
- No transparency re shared or isolated infrastructure or its geographical location
- Regulatory Risk/Shutdown
Solo Staking - Higher profits hidden by a poor UI.
Solo staking is harder than using an LSD (like Lido). Staking as a service providers are not as good, but they make staking easier compared to running your own node.
The price you pay in staking returns for the quality of the user experience should be transparent. Today it is not. Tomorrow the UX that has made things easy is the intermediary layer between you and significantly higher returns and it makes Ethereum structurally weaker.
The statement, “A user interface is like a joke. If you have to explain it, it's not that good.” Is accurate and it explains why Solo staking is not as popular as those forms of staking that have put a better user experience in front of it.
But you do get higher returns for solo staking, today, tomorrow and in the future. You also get an Ethereum network that is decentralised in terms of the data and the staking returns. The Ethereum core dev team and the client teams have not changed their mind on what good looks like for Ethereum. Its Solo Staking.
To make the user interface for solo staking a much better joke the first step is being open about the problem of how much harder it is than some other user interfaces. Higher staking returns combined with the fact that firms like Launchnodes provide users with all the technical hand holding you need does not wash away the fact that you will be spinning up servers and running software, whilst having to self custody your funds.
Main danger of Ethereum staking being centralised through better user experiences, is that we never get to the promise of a new set of local financial services and autonomy that serve and generate returns locally or directly to people, whilst harnessing the growth is use of Ethereum, which is the central driving force behind Ethereum staking returns.
The upside of Ethereum solo staking and the poor user experience is more money today, tomorrow and in the future. The other existential danger is that unless small pools of capital (100k-$5M) solo stake, and learn how do it, then banks and existing financial institutions will very happily step in to provide those with vast amounts of capital, a regulatory framework to bar new entrants (look at challenger banks in the UK) and a user experience that makes staking look like a black box financial outcome.
About Launchnodes
Launchnodes enables enterprises and individuals to easily solo stake Ethereum and on other Proof of Stake blockchains. The key benefits that Launchnodes clients get, are maximum rewards (execution and consensus layer), security and full autonomy. It is zero-trust solo staking, where you get to own your node, whilst it runs on the infrastructure that you own. Current infrastructure options are AWS, GCP, Azure and bare metal.
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