The Ethereum network’s transition to a proof-of-stake (PoS) consensus mechanism has ushered in a new era for DeFi. In its previous form, Ethereum utilized a proof-of-work (PoW) design to validate transactions on the leading smart contract blockchain.
Under PoW, miners would compete to solve new transaction blocks to receive rewards in ETH. This approach was highly exclusive and required massive energy consumption.
Proof-of-stake offers a far more accessible and lightweight alternative. Anyone can participate in securing the network by staking their ETH and earn staking rewards for doing so.
Staking involves locking up ETH to help secure the Ethereum blockchain. This mechanism was introduced in 2022 with Ethereum’s merge to the beacon chain. Batches of 32 ETH are used to run validator nodes, which confirm the validity of new transactions on the network.
Staking withdrawals went live in early 2023 following Ethereum’s Shanghai upgrade. Impressively, ETH staking has continued to increase following the upgrade, illustrating the massive demand to participate in the network.
Users can stake their ETH directly to the staking smart contract. However, this method carries a high barrier to entry. Solo stakers need to lock up a minimum of 32 ETH to run a full validator node. Additionally, maintaining the node requires significant technical knowledge and resources. Solo staking is best suited for experienced users with large capital and a strong commitment to the network’s long-term success.
Thankfully, users can also earn rewards via liquid staking, which breaks down these barriers to entry. In contrast to solo staking, liquid staking only requires a minimum deposit of 0.01 ETH. Furthermore, liquid staking services issue liquid staking tokens (LSTs), which allow you to retain full control of your capital.
While centralized crypto exchanges offer liquid staking services, these platforms offer far less autonomy than decentralized alternatives.
Launched in late 2020, Lido Finance is the most popular liquid staking platform in DeFi. More than 8.8 million ETH have been staked through Lido, accounting for nearly 33% of all ETH currently staked. Lido users receive the platform’s native LST, stETH, which offers 3.60% APY as of April 2024.
Rocket Pool is DeFi’s another top liquid staking protocol, with more than 1 million ETH staked via the platform. The protocol currently delivers 3.2% APR via its native LST, rETH.
Traders may also opt to stake assets via Origin Ether (OETH). Origin Ether offers higher APYs than Lido and Rocket Pool, as it optimizes yield through DeFi liquidity provision. Thanks to this innovative approach, OETH offers APYs around 4% at the time of writing.
The following steps detail how you can harness liquid staking platforms to earn yield on-chain.
Web3 wallets act as the gateway to participate in on-chain liquid staking. Metamask remains the most popular choice for DeFi users, with over 21 million active users.
Metamask’s portal provides clear instructions on how to set up a Web3 wallet. It’s vital to store the generated recovery phrase securely. Should you lose access to your account, your recovery phrase can recover your assets.
Once your Metamask has been set up, copy the account address. You can use this address to deposit ETH to your wallet.
Lido Finance, Rocketpool, and Origin Ether are top choices for Ethereum liquid staking. These platforms allow users to deposit as little as 0.01 ETH to staking pools to start earning ETH staking rewards.
Simply deposit ETH to your chosen platform to get started. Alternatively, you can swap for liquid staking tokens on DEXs, such as Uniswap and Curve. Liquid staking services issue liquid staking tokens (LSTs) representing your capital and accrued yield.
Liquid staking tokens maintain a peg to ETH and can be transacted freely across DeFi. This means that you do not need to lock up any capital to participate in liquid staking.
Liquid staking platforms deliver yield to users in the form of LSTs. In general, users can look forward to 3-5% APYs from these services. These rewards can be converted to other cryptocurrencies or used in DeFi to further compound passive returns.
At present, around 25% of ETH supply is staked to the network. While significant, this figure is far lower than other proof-of-stake blockchains, which regularly see >40% of supply staked. It’s important that as much ETH is staked as possible, as network security is bolstered by a higher number of validators.
As more investors adopt ETH staking to earn yield, staking rewards are bound to decrease. This is because the same pool of yield is being split between an increasing number of entities.
The novel sector of LSTFi has emerged to address the problem of yield compression. These platforms utilize various mechanics to compound yield and offer users far higher returns than from liquid staking alone.
Origin Ether (OETH) is among Ethereum’s largest LST protocols, with nearly 45,000 ETH in total value locked.
Despite its rapidly growing scale, OETH’s meticulous strategies deliver APYs that are higher than leading liquid staking tokens. The protocol deploys reserves to Ethereum's beacon chain to earn staking rewards, while enhancing yield through novel integrations with DVT and DeFi liquidity pools.
OETH is fully collateralized by ETH that is directly staked to the Beacon Chain using decentralized validator technology (DVT). Integrated with ssv.netork, OETH holders can look forward to additional yield from SSV token incentives.
OETH maintains a peg to ETH, empowering users to retain control of their capital while still earning ETH yield. This yield is distributed directly to holders’ wallets, thus reducing time and gas costs for stakers.
Using OETH also offers users the ability to have a direct say in how their funds are being managed. Users can stake Origin DeFi Governance (OGV) to receive voting rights in the form of veOGV. At the same time, stakers earn yield from token emissions and a share of fees generated across Origin's ecosystem.
In contrast to centralized platforms, OETH is built transparently with an open-source codebase. The protocol has been rigorously audited by the likes of OpenZeppelin and TrailofBits to ensure that users enjoy a seamless and secure investing experience.
As with any investment, staking ether carries risks. However, opting to use audited platforms like OETH helps reduce these risks, as users maintain control over their investments without needing to lock up funds.
Further, OETH’s innovative mechanics shield users from reduced yields as ETH staking adoption grows. By harnessing protocols like Curve and Convex, OETH is able to offer higher yields than underlying LSTs at scale.
Staking ETH offers investors the chance to help secure crypto’s leading smart contract blockchain, while being rewarded for their efforts. With OETH, users can participate in one of blockchain’s most innovative offerings with minimal risk.
Explore Origin DeFi’s ecosystem to discover how you can get involved.
