How to Stake Ethereum on Coinbase – What You Need to Know

Staking crypto can be a great way for investors to earn rewards simply for holding specific cryptocurrencies, such as Ethereum. The crypto buying, selling, transferring, and storing platform Coinbase allows Ethereum holders to sake a portion of their investment.

If you’re interested in this method of earning off of your investment, here’s a complete guide on how to stake Ethereum on Coinbase. This article also contains some pros and cons of this process and the potential risk it may pose.

How Does Staking Work?

Typically, staking involves a staking pool, which is similar to an interest-bearing savings account. Thus, staking yields rewards because the blockchain puts that crypto work.

Proof of Stake is what’s known as a consensus mechanism, and cryptocurrencies that can be staked use it. The Proof of Stake ensures that each transaction is verified and secured without the need for a payment processor or bank to perform that step.

When you stake your Ethereum, it becomes part of that process.

The great thing about staking Ethereum on Coinbase is that there’s no minimum number of tokens required for it. On the other hand, you’ll require 32 Ethereum tokens if you want to run a validator node of your own.

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How to Stake Ethereum on Coinbase

Here are the steps you must follow to stake Ethereum on Coinbase. You should note that staking, like other processes regarding crypto, can be as complex or simple as you want it to be. That will, thus, depend on how many levels you want to take it to.

Considering this guide is targeted at new users, you’ll learn how to get started with staking. Once you get the hang of it, you can continue to make it more complex. With that said, let’s get into it.

1. Create an Account on Coinbase

If you haven’t yet created an account on Coinbase, you’ll need to do so to start using its services. Visit the website for this step and follow the instructions. The process is short and intuitive.  You’ll need to provide your personal information, including your name, email, and location.

After that, you must enter a secure password. Also, Coinbase ensures that it keeps all users’ personal information secure, so you don’t need to worry about that when signing up.

• Verify Your Identity

You will need to verify your account on Coinbase after you create it. This step is for tax purposes, so you’ll need to provide the last 4 digits of your Social Security number, your driver’s license, and your date of birth. You may also need to provide a photo ID to verify your identity so that someone else doesn’t try to make an account in your name.

2. Buy Ethereum Tokens

You will need to buy Ethereum tokens to stake them. The quickest and easiest way to do that is to buy the token on Coinbase. This way, you can purchase and stake your coins in one place. So, you can buy in two different ways, which is just like buying stocks. You can purchase your tokens on a limit order or a market order.

You can set a maximum price you are willing to pay to buy Ethereum tokens with a limit order. In that case, the seller must accept that price for the purchase to be made.

On the other hand, you can purchase Ethereum tokens at the current market price with a market order. This method is less complex, so it’s best for beginners.

3. Join the Staking Waitlist

You cannot begin to stake Ethereum on Coinbase right away because of the high demand for staking. So, you need to join a staking waitlist. There is no certainty for how long you’ll have to wait in line to start staking. However, it’s best to get on the waitlist as soon as possible because your turn will come sooner that way than starting later.

4. Stake Ethereum on Coinbase

Eventually, when your turn comes, you can start staking your Ethereum tokens on Coinbase. Coinbase operates the validator nodes, so the process is simplified for you. What you’ll need to do is to deposit whatever amount of Ethereum tokens you want for staking, and Coinbase will handle the rest of the aspects of this process.

You won’t need to do anything further after staking your tokens on the Eth 2.0 network. Your coins will yield rewards in terms of interest, i.e., a percentage of your tokens’ worth. The great thing about this is that you won’t even have to do anything to start making money.

Of course, this also means that you’ll earn more money if you stake more tokens.

Pros and Cons of Staking Ethereum on Coinbase

Now that you know how to stake Ethereum on Coinbase, you should also be aware of the pros and cons of this process.

Pros of Staking Ethereum on Coinbase

Here are some pros of this process.

Great for Generating Income for Long-Term Ethereum Holders

Typically, long-term Ethereum holders don’t trade their investment and wait for the eventual opportune moment to sell it and profit greatly.

While that is a great strategy, the investment itself won’t generate any income until its sold. In that case, staking some of that investment can help generate some money instead of it just sitting in the wallet.

Choosing to stake Ethereum on Coinbase can help you earn anywhere between 4% and 8% annually on interest through this process. The interest percentage will vary based on how much Ethereum is staked on the Eth 2.0 network.

That said, you will receive these rewards in the form of Ethereum tokens. This can be a great choice if you believe that this crypto will continue to appreciate in value.

Staking Helps Support Blockchain Projects

If you want to support some blockchain projects, staking can help contribute to improving their efficiency and security. So staking funds enables the blockchain to become more resistant to attacks. At the same, it makes it easier and quicker for it to process transactions.

Some blockchain projects also give some participants staking governance tokens. These tokens allow Ethereum holders to have a say in upgrades to the project in the future.

No Minimum Limit of Tokens for Staking

With Coinbase, you don’t need a minimum amount of Ethereum tokens to start staking. However, you will need at least 32 Ethereum tokens if you choose to stake independently.

Cons of Staking Ethereum on Coinbase

Here are some cons of this process.

Can Be Risky

The biggest disadvantage of this process is that it can be risky. The risk stems from the usual market volatility with Ethereum. So, if the market value for Ethereum decreases, the amount of interest you’ll earn will be lower, and the amount of money you’ll be making in total will be lower than before because you’ll get paid in Ethereum tokens.

Moreover, the tokens you stake will have to be part of a vesting or lockup period. During that time, you won’t be able to transfer your crypto. So, if the price begins to drop, you won’t be able to sell those staked coins, which can result in a significant loss for short-term investors.

Therefore, you should only consider staking if you plan on investing in and holding Ethereum tokens.

Coinbase Reduces the Amount of Return You Get on Your Staked Tokens

While Coinbase doesn’t have a minimum token limit for staking Ethereum, you will receive less money from it. So, if you choose to stake Ethereum independently, you can expect to earn about 25% more on interest than you would if you do this process on Coinbase.

This is because Coinbase takes some of that money to facilitate the staking for you. However, only investors with significant holdings can stake independently because it’s never advisable that you stake all of your holdings.

Last Few Words

After reading this guide on how to stake Ethereum on Coinbase, the biggest takeaway is that staking is best suited for long-term Ethereum holders. This is because long-term investors don’t fear market volatility as much as short-term investors do. So, sudden changes in price won’t affect the gains that investors will make in the long run.

It’s always best to be smart about these processes because you are putting quite a bit of money at risk. Do your research on the nuances of staking and other processes so that you can capitalize on your investment in the best way possible.

Moreover, if you don’t want to stake Ethereum, you can choose other types of cryptocurrencies instead. Cosmos and Tezos are two other cryptocurrencies that you can stake.

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