Since the Ethereum blockchain’s network launch back in 2015, its core developers have been on a mission to upgrade it. Following what feels like an eternity, the long-promised and highly anticipated Ethereum 2.0 (Eth2) is finally here. The first phase of the planned three-phase launch was activated on December 1st, 2020.
You can support the Eth2 rollout by staking your Ether coins and running a validator node. However, this might be too technical for some users. There are several alternatives for someone who wishes to participate in staking Ethereum but lacks technical expertise or is unwilling to operate a validator node. One of those alternatives is using a staking pool, and in this guide, we focus on one such pool offered by a leading cryptocurrency exchange Binance.
There are several advantages to staking Eth2 on Binance, and we will highlight them. In this guide, you’ll learn why you should consider staking Ether on Binance and how to do it correctly. But first, let’s brush up on some background information on Ethereum staking, what it is and why it matters.
What is Ethereum staking?
When Ethereum fully transitions to Ethereum 2.0, it will have successfully switched from the current Proof of Work (PoW) consensus mechanism to Proof of Stake (PoS). What that means is that miners will be replaced with stakers.
Staking involves holding a portion of your assets in a wallet or account to earn the right to validate transactions. This can also earn you the right to participate in the governance of the blockchain depending on the network. In Ethereum’s case, stakers have the right to both.
Each Ethereum validator requires 32 ETH to operate a node. There are over 150,000 validators on the Eth2 (Beacon chain) network, staking more than 4,957,000 ETH at the time of writing. You can always check the latest stats here. A single individual or institution can operate multiple nodes.
Staking your Ether comes with its perks, and the biggest is that validators are rewarded with new Ether coins. These are paid out in percentage interest, calculated according to the total number of staked coins. The more ETH staked, the less the APR (annual percentage rate).
The APR started at 21.6% for up to 524,288 total staked coins. At the current ~5 million coins, the APR has reduced to 7%. The rate will keep falling until the total staked coins exceed 10 million, at which point the rate will remain constant at 4.9%.
It is important to note that all Ether locked (staked) before the launch of phase 1.5 cannot be unlocked until that phase rolls out.
Ethereum 2.0 launch roadmap
The Eth2 launch roadmap is extremely important to the entire Ethereum community, including the validators or stakers. As a staker, you may want to follow along and estimate how long it may take to finally unstake your Ether holdings.
Here’s the current roadmap as the core developers shared it on the rollout of the new network.
Phase 0 – Launch of the Beacon chain
On December 1st, 2020, Ethereum core developers launched the Beacon chain upgrade, the PoS consensus layer.
Phase 1 – The merge
Estimated to launch in 2021, this phase will see the two network layers (Eth1 and Eth2) combine to form one layer that utilises staking as a consensus mechanism. At this point, miners will be retired in favour of the stakers.
Phase 2 – Shard chains
Estimated to launch sometime in 2022, the last phase will introduce shards linked together like the blockchain to form shard chains.
In the context of Ethereum, shards will represent the entire Ethereum database split into 64 smaller databases. Sharding helps spread the load on the main Beacon chain, thereby increasing throughput.
With time, the Ethereum core developers hope to add more features to the shards to achieve their intended scalability and dynamism of the network.
Benefits of staking Ethereum 2.0 with Binance
Staking Ethereum through Binance has several advantages: avoiding technical setup, reducing risks of having your stake slashed, or even reducing the risk of losing your coins to theft. Slashing happens when a validator loses a part or the entirety of their stake for violating node operation policies. This can be either non-performance caused by being offline for too long or acting in a nefarious way.
Here’s a rundown of the benefits of staking Ethereum 2.0 with Binance:
- Outsource node setup and maintenance to Binance;
- Safety of assets with the exchange through its SAFU program;
- Binance charges zero fees for staking Ether;
- All staked Ether on Binance is tokenised into BETH tokens issued to the stakers at a 1:1 ratio;
- You can stake less than 32 ETH. Binance allows a minimum of 0.1 ETH.
What is the BETH token on Binance?
BETH stands for Beacon [chain] Ethereum. It is a tokenised version of Ethereum issued by Binance to Eth2 stakers on the Binance staking pool. If you decide to stake Ether on Binance, you will receive BETH tokens in exchange. Binance issues BETH tokens on a 1:1 ratio to your staked Ether coins.
Important: All staked Ether on the Beacon chain cannot be redeemed until the Eth2 upgrade fully rolls out. This lockup period can cause an inconvenience to active investors looking to make better use of their assets. Binance provides those investors with an asset that represents their staked coins that can be used almost as equally as their ETH coin equivalents.
BETH tokens can be traded for any other coin/token, used for investment on Binance Launchpad projects, used on DeFi platforms to earn interest or even on yield farming platforms such as Beefy and Autofarm.
However, the most important use for BETH is that all holders of the token have the right to claim Eth2 staking rewards which are distributed by Binance regularly. And when the staking lockup period lapses with the final rollout of the Eth2 upgrade, BETH tokens will be required to redeem the staked ETH coins.
How to stake Ethereum 2.0 on Binance
Staking Ethereum on Binance is very simple and only takes a few steps. But first, before we proceed, make sure you have some Ether to stake in your Binance Spot wallet. If not, you can transfer some from your private wallet to Binance or buy some on the Binance trade platform.
Step 1 – Navigate to the [Binance Earn] page
Login to Binance here (or go to https://www.binance.com), hover over the Finance tab on the main navigation, and click on the ‘Binance Earn’ link.
Step 2 – Navigate to the ETH 2.0 staking page.
There are two ways to achieve this from the [Binance Earn] page. Scroll down just a section below the header section. Locate the Eth2 staking button as shown here.
Scroll further down to a section below the one shown above, locate the ‘Eth 2.0 Staking’ tab, and click on ‘View More.’
Step 3 – Proceed to stake your Ether
On the ETH 2.0 Binance staking page, click on ‘Stake Now.’
Step 4 – Fill in the amount of Ether to stake.
After clicking on the ‘Stake Now’ button on the previous step, Binance will load a dialogue box in which you will have to fill in the amount of ETH to deduct from your Spot wallet. You can stake as little as 0.1 ETH. Click [Confirm].
Step 5 – Provide a second confirmation.
Binance will prompt you to make a second confirmation to ascertain that you understand the terms of the transaction.
Mark all the three checkboxes and click [Confirm] to stake your Ether coins.
Binance will issue an equal amount of your staked ETH as the BETH token into your Spot wallet. You can check your BETH balance through the [Fiat and Spot] page. Binance will use the BETH balance on your Spot wallet to allocate Eth2 staking rewards to your account. The rewards will still be paid out in BETH tokens.
It’s worth noting that BETH tokens can be bought and sold on the Binance marketplace. You’ll notice that the price of BETH tokens on Binance differs from that of Ethereum, the coin on which the token is based. This is because despite BETH having a 1:1 issuance ratio, the asset is exposed to market dynamics of supply and demand in the marketplace.
Cryptocurrency staking is a great way to earn passive income as you contribute to developing a new asset class and economy. Using the Binance staking pool is one of the best ways to stake your Ether, especially for the non-techies. It’s hustle-free, and you get a representative token called BETH to stand in for your staked assets.
You can use BETH almost as similar as you can actual Ether coins. It can be bought, sold, traded, invested in new projects on the Launchpad, used to earn extra income on DeFi platforms, among several other uses.
The tokenized BETH token is what makes Binance stand out from the crowd when it comes to staking your ETH. You Ether may be locked up, but that doesn’t limit you in any way.