In a groundbreaking development, Cactus Custody has introduced an unparalleled avenue for native ETH staking through seamless integration with Paralinker and RockX.
To better understand some of the intricacies of ETH staking, in this article, we conduct a comprehensive exploration of ETH staking, elucidating its advantages, and comparing Staking-as-a-Service and pooled staking. This journey lays the foundation for understanding how native ETH staking can amplify rewards beyond self-staking while mitigating risks more effectively than pooled staking.
Understanding Proof-of-Stake
Proof-of-Stake (PoS), a fundamental consensus mechanism employed by blockchains, governs the selection of validators entrusted with validating and approving new sets of transactions. These validators, which are the cornerstone of network operations, hold a certain amount of cryptocurrency and effectively ‘lock it up’, determining their ability to validate transactions and add new blocks based on the amount staked and the duration of their holdings. This protocol is integral to the operational dynamics of blockchains like Ethereum, Tezos, Cardano, Solana, Algorand, and many more.
ETH Staking: Offering Opportunities to Earn, While Securing the Network
Ethereum’s shift to a proof-of-stake consensus mechanism presents an enticing opportunity for participants to engage in ETH staking. ETH staking entails depositing 32 ETH to activate validator software, which involves storing data, processing transactions, and adding fresh blocks to the blockchain. By doing so, validators contribute to Ethereum’s security and simultaneously earn new ETH as rewards.
The benefits of ETH staking are substantial:
- Earn Rewards: Validators are rewarded for critical tasks that support network consensus. Running software to efficiently group transactions into new blocks and verifying the work of fellow validators is integral to the network’s secure operation, and validators are compensated accordingly.
- Enhanced Security: The more ETH staked, the more robust the network becomes against potential attacks. Controlling a majority of validators necessitates holding a significant portion of ETH, ensuring a more resilient system that safeguards against malicious actions.
- Sustainability: A significant departure from energy-intensive proof-of-work systems, ETH staking operates on a more sustainable premise. Staking validators can function on modest hardware, consuming minimal energy, thus reducing the carbon footprint associated with traditional mining approaches.
ETH Staking: Staking-as-a-Service vs. Pooled Staking
When it comes to ETH staking, two distinct approaches emerge: Staking-as-a-Service and Pooled Staking. Each method has its unique advantages and considerations, catering to varying preferences and risk tolerance levels.
Staking-as-a-Service
Staking-as-a-Service generally offers the full spectrum of protocol rewards, with a service fee deducted for validators’ operations. A convenient dashboard interface often accompanies these services, allowing users to effortlessly monitor their validator’s performance. The process involves a straightforward deposit of 32 ETH, with assistance provided in generating keys for security. Notably, Staking-as-a-Service is a non-custodial staking method, effectively eliminating concerns over counterparty risks. For users, it’s crucial to ensure the safe storage of these keys to mitigate potential risks effectively. If users are utilising a service integrated with a third-party crypto custodian, the secure management of the key will be handled by professionals, alleviating their burden.
Pooled Staking
Pooled staking services are offered by platforms like Lido and other centralised alternatives. The service providers employ varying reward accrual methods, contingent on the chosen staking approach. Many pooled staking platforms offer liquidity tokens that encompass both your staked ETH and your share of validator rewards. These liquidity tokens can be stored in your wallet, used in DeFi applications, or even sold should you decide to exit the pool. Pooled staking platforms often have minimal ETH requirements, with some projects necessitating as little as 0.01 ETH. However, it’s essential to acknowledge the presence of counterparty risk associated with these centralised platforms.
That’s where Cactus Custody comes into play. Through Cactus Custody’s ETH staking, users can seamlessly partake in the staking-as-a-service offered on the platform by Paralinker and RockX. This allows you to fully capitalise on the potential for passive income, all the while delegating the intricacies to the team of professionals.
Additionally, when you participate in ETH staking through Cactus Custody, you will receive 100% of the protocol rewards without any fees deducted. By accessing ETH staking services provided by our partnered Staking-as-a-Service providers through Cactus Custody, you can enjoy a staking experience with a reduced risk of slashing (or loss of staking tokens), and an extra portion of profits1.
Through Cactus Custody’s ETH staking, users can seamlessly partake in the staking, capitalising on the potential for passive income, all the while delegating the intricacies to the team of professionals. While the inception of the service signifies the pioneering step into staking services, it merely signals the prelude to a transformative odyssey.
- Maximal extractable value (MEV) refers to the maximum value that can be extracted from block production in excess of the standard block reward and gas fees by including, excluding, and changing the order of transactions in a block.
↩︎