You can now stake Ethereum on MetaMask—should you?

The popular crypto wallet Metamask launched his staking feature, which means users can now lock their Ethereum thanks to the new functionality via Pool or rocket pool to earn financial rewards.

This means that anyone with a MetaMask wallet can now easily start earning yield on any amount of ETH they want directly from their wallet, and without having to navigate what can often be interfaces. complicated user on staking applications. But should they?

Staking, after all, is not without risk, not to mention the fact that detachment (i.e. recovering your ETH from a staking contract) is not an option at this time. Ethereum developers, however, say that this feature will be coming soon.

Staking Providers

For risk-averse users, staking can be a lucrative business. Although reward rates vary, MetaMask’s site claims that users can earn a return of around 5.22% per year on ETH deposits with Lido and 4.59% with Rocket Pool.

According to Lido website, over $6.9 billion worth of ETH is currently staked through its service, earning users about 4.9% annually. Lido is a so-called liquid staking provider, which means that users who stake ETH through Lido receive an equivalent amount of staked Ethereum (stETH) in exchange for their staked tokens. This allows stakers to stay “liquid” while locking up their ETH, allowing them to use their stETH on other DeFi services.

Staked Ethereum is currently trading at a slight discount to ETH. While ETH is priced at around $1,418, STETH is currently trading for $1,407, according to data from CoinGecko.

Lido is currently the most popular staking provider, with 29% of all ETH staked, according to Dune Analytics Data.

Rocket Pool is another liquid staking service, which provides users with rETH in exchange for their staked tokens. But Rocket Pool on MetaMask appears to have already reached “maximum capacity”, meaning users may only be able to stake ETH via Lido on MetaMask at this time.

Rocket Pool staking via MetaMask has reached capacity. Image: Metamask.

How many have wagered through MetaMask so far? While MetaMask senior product manager Abad Mian didn’t provide specific numbers, he said Decrypt that the team is happy with the deployment so far.

“We started the rollout yesterday at 10% with a full rollout today. We’ve seen exciting engagement since the news broke four hours ago,” Mian said.

But there are other options for ETH staking beyond the two providers that MetaMask now offers through its platform. Coinbase, Binance United States, krakenand link also offer Ethereum staking, each with varying reward rates. Of these centralized providers, only Coinbase and Nexo currently offer a liquid staking option, returning Coinbase Wrapped Staked ETH (cbETH) or Nexo Staked Ethereum (NETH) tokens in exchange for ETH, respectively.

Solo staking is also an option, but users will need a minimum of 32 ETH (about $45,800) to do so.

Benefits of staking

Since Ethereum is a proof-of-stake blockchain, more users staking ETH and running validators around the world will, in theory, make the network more secure and decentralized over time. That’s a good thing for the network, which has been criticized for being more centralized compared to bitcoin.

Passive income through staking rewards may also seem like a no-brainer to some long-term holders who don’t plan to immediately sell or trade their bags of ETH in the short term.

Staking Risks

But locking crypto with a third party comes with risks. There’s a common phrase in crypto: “Not your keys, not your coins.” And that sadly rang true as the market grapples with the devastating effects of Terra’s Crash and The collapse of FTX. Even now as a Gemini closes its “Earn” program following the collapses of crypto lenders BlockFi and Celsius, Should Holders Ever Trust Their Crypto to a Third Party? What are the risks and what do Ethereum developers think?

MetaMask’s parent company, ConsenSys, explained in a Publish last month, what he thinks are the main risks involved in staking ETH. Specifically, it highlights the potential risks associated with compromised third-party software, buggy smart contractsand large symbolic price fluctuations.

It also raises the possible risks associated with undesirable governance decisions made through any CAD, code transfer issues, “legal uncertainty” and the possibility of compromised private keys. While this may seem like a wide range of potential risks, each is possible if the user compromises their own data or if a powerful third party makes game-changing decisions.

Staking withdrawals

Before you consider staking Ethereum, it is essential to know that staking is not currently available. This means that right now your Ethereum can enter, but it can’t get out yet. This might come as a shock to some, as it means staking is currently a one-way experience, but the Ethereum developers plan to change that very soon.

The Shanghai update scheduled for early this year will enable staked withdrawals of ETH.

“After the Shanghai update, bettors will then be able to withdraw their rewards and/or core deposit from their validator balance if they wish,” the Ethereum Foundation said. website bed.

Ethereum Developer Marius van der Wijden Told Decrypt withdrawals could take place as early as March.

“We have launched three withdrawal devnets and will soon be doing withdrawal phantom forks (where we enable the feature on a phantom copy of the normal Ethereum chain),” he said. Decrypt in a message. “Withdrawals are expected to go live in March.”

As for whether Ethereum holders should stake their ETH or not, “people should listen to their instincts whether they want to stake now or in a few months,” van der Wijden said.

“The code for withdrawals is largely complete, but it still needs to be thoroughly tested before rolling out,” he said.

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