It is no secret that staking ETH is a lucrative opportunity for people to earn passive income while taking part in one of the most exciting technological movements of our time. Yet, of the many different ways that someone can go about staking ETH, staking at home is by far the best method for a few key reasons.
In this article, we will explain why it is best to stake from your own home and will explain how you can avoid the common risks and pitfalls of at-home staking.
Staking at home lets you maximize your rewards
One of the most common ways to stake projects like Ethereum is through using centralized exchanges. People who are just getting started are often pointed in the direction of these exchanges due to their ease of use.
Another popular method is using a staking pool, in which users “pool” their resources together and then divide earnings based on a set of criteria set by the staking pool.
However, when you use an exchange or a staking pool as a way to stake ETH and other projects, your earnings are significantly diminished. This is because both exchanges and staking pools claim a portion of your staking rewards as a fee. Currently, popular exchanges such as Kraken and Coinbase claim as much as 15% of your earned rewards as administrative fees. While this fee could seem negligible when you are first getting started, in both the medium and long term you will find that you have left a significant amount of money on the table.
To give you an example of how much money this could turn out to be, let’s assume you stake the current minimum amount of 32 ETH. With this stake, you could be looking at earning around $2,241 USD per year if you were staking on your own (per StakingCalculator). By using one of these major exchanges, however, you could be losing $336 from your earnings each year. Over five years, this means you would lose out on $1,680 USD. As you can imagine, with a larger stake and over a longer period of time, these losses will become even more significant.
At the end of the day, why should you let someone else profit from your work? By staking on your own, you can ensure that you are not being exploited by anyone and will get to keep all of the passive income that you make through staking.
Independent staking means being in control
Tracing back to the introduction of Bitcoin, one of the most important principles of the cryptocurrency movement is the idea that we should all have more independence from central authorities such as banks. As a result, when people rely on centralized exchanges or staking pools, they are missing out on one of the core benefits that the cryptocurrency movement can offer: control of your own finances.
By now, it should be clear why it is so important to make sure that you are always the person in control of your own financial activities in the crypto space. For instance, we previously covered the fact that when someone else knows your private key, they have the ability to control your funds.
Staking through any centralized platform limits your ability to make the decisions that are best for you. Most importantly, it puts you at risk of having your earnings halted or stolen, as these platforms can freely choose to act in ways that harm you and benefit them. For a recent example, look no further than the massive FTX scandal, in which hundreds of millions worth of crypto assets were stolen from users of the platform.
When you stake on your own, you are not at the whim of anyone else. By operating your own validator, you are directly interacting with the decentralized Ethereum network without any centralized third party being involved at all. This means that independent staking allows you to enjoy the full benefits that the cryptocurrency movement was specifically designed to offer.
Contribute to network decentralization
Cryptocurrencies like Ethereum function on a peer-to-peer basis in which people across the world contribute to the network’s decentralization and independence. There can be significant risks placed on a network’s overall health if the majority of staking is handled by a few centralized organizations.
For instance, if the majority of a network’s staking output is sourced from a specific part of the world, regulation within that country or territory could have a drastic impact on the network. In addition, if a few centralized exchange platforms are responsible for most staking, these platforms could theoretically act within their own interest to exploit the network at the expense of everyone else.
When it comes to Ethereum in particular, there are currently more than 527,000 validators. However, as recently as last year, there were concerns about as much as 64% of staked ETH being controlled by just five centralized entities. Any single party representing a majority of a decentralized network’s governance could place the network at risk of a 51% attack, in which a ruling stakeholder could alter the blockchain for their own benefit.
Fortunately, independent stakers across the world are preventing these scenarios from becoming a reality. Instead, individual stakers allow networks like Ethereum to thrive. As an individual, when you stake on your own you are contributing to the network’s user diversity and are helping to ensure that the network stays healthy and decentralized.
What are the risks of staking on my own?
Staking ETH on your own can come with certain risks that could drastically impact your earnings. The largest of these risks regards network penalties.
The worst of these penalties is a process known as slashing, in which a validator is ejected from the network. As a consequence of slashing, you could lose a portion of your stake and be unable to continue operating an ETH validator.
In order to avoid these penalties, you will need to do three things:
1. Keep your hardware running 24/7
In a Proof-of-Stake (PoS) network like the one that Ethereum now uses, validators are penalized for certain actions that could hurt the network. For instance, if your uptime is too low you could receive inactivity penalties that take away from your earnings and even your stake.
In order to counter this, you will need to find a way that you have enough uptime to avoid penalties taking away from your overall earnings.
2. Update your software and maintain your hardware
Another reason why someone may be penalized or slashed from the network has to do with their reliability as a validator. If you attempt to validate fraudulent blocks or place a risk to the network, you will be penalized accordingly.
To avoid these penalties, you need to make sure that your software stays up to date with critical client and network upgrades. In addition, you will need to maintain your hardware in order to ensure that your validator remains operational.
3. Meet all of the technical requirements
Put simply, you will not be able to earn money with a validator if you do not meet the network’s requirements at a satisfactory level. These requirements are continuing to evolve over time, so it is important to have access to a device that is equipped for both current requirements and requirements that could emerge in the near future. According to Ethereum.org, solo stakers need to meet various criteria such as being proficient with computers, understanding secure key management, and knowing how to maintain sufficient uptime. In addition, a staker will need to back up their technical knowledge with access to robust hardware that is capable of supporting their staking activities.
While trying to mitigate these risks is a tall ask for the average user, there is actually a way to stake at home while easily avoiding these risks altogether. The secret is to stake through your own AVADO blockchain device.
Using AVADO to avoid staking risks
Our range of plug-and-play blockchain devices guarantee that anyone, regardless of their experience level, can stake independently. Best of all, staking ETH and other crypto projects with an AVADO device means that you will not have to deal with any of the risks that you would otherwise encounter if staking on your own.
This is because all of the devices in our range offer 24/7 uptime, frequent software updates, and robust hardware. These devices not only exceed current network hardware requirements, but are also able to meet future requirements as well.
As we have explored in this article, staking on your own is the best way to earn passive income, regain your financial freedom, and help networks stay decentralized. Get your own AVADO device today to start staking independently in just a few easy steps.
