As Ethereum abandoned the “proof of work” or mining model to validate transactions, many were excited to see the shift. The general expectation was that it would be easier to “mine” or generate new Ethers because the “proof of stake” model supposedly makes it unnecessary to obtain resource-intensive equipment for which Bitcoin mining is notorious.
However, things do not appear to be as rosy as what many expected. Staking may appear more accessible than mining, but it is not for everyone. Also, there are risks involved for those who do not know how to go about it the right way.
High stakes
One of the biggest hurdles in earning rewards from Ethereum staking is the amount it takes to stake. A minimum of 32 ETH is required to be deposited on a PoS validator node. This is the amount needed as “proof of stake” or evidence that the person who wants to be involved in the validation of a transaction has a stake in the Ethereum network.
To be clear, 32 ETH is no small amount. Based on the most recent update of the Ether price, it translates to nearly $62,000. That’s the price of a high end 4×4 SUV or at least two Chevrolet Equinox cars. Not many have that amount to tie to a transaction to complete a validation process.
The good news is that it is possible for multiple Ethereum users to pool in their ETH balances to satisfy the 32 ETH requirement and conduct a staking process. Many users can contribute to a staking pool so they can participate in a validation process. They then share the staking rewards based on the percentage of ETH they contributed to the pool for the specific transaction.
Staking risks and solutions
Staking pools are a great opportunity for many to have access to staking rewards. However, they come with risks. Often, staking pools make use of a third-party service or platform. It seldom happens with strangers agreeing to send their ETH balances to one account so they can undertake staking. A third-party platform is usually involved.
The problem is it is difficult to be sure if the platform is adequately secure and trustworthy. Many of these platforms are built by enthusiasts, not professionals who have the experience and expertise in ensuring secure transactions. Additionally, there’s the problem of staking pools that may mismanage the process or resort to suspicious activities.
The best possible solution to this is the use of a non-custodial staking platform. In other words, a platform which, in spite of the fact that it is facilitating the staking pool, does not hold any of the validation or withdrawal keys.
Those who want to be involved in Ethereum staking need to make sure that they know what they are doing. There are many important details to know. Sometimes, even without the intention of committing rule violations, stakers can also be subjected to heavy slashing.
