🚀 Ethereum 2.0 Staking Guide
A step-by-step guide on how to squeeze the most yield out of your staked Ethereum.
June 5th, 2021 | Sign up
Happy Saturday. Today’s guide is on how to put your crypto holdings to work (generating you rewards), instead of just letting them sit in an exchange or wallet. Get ready to play with money Legos! 🧱
What we’ll be going over today ✏️
Overview of staking, Ethereum 2.0, and being a liquidity provider
Depositing the Curve LP tokens into a pool on Convex Finance to earn boosted Curve rewards and CVX tokens
Don’t worry if this none of these words make sense, we will break them all down for you. This isn’t a difficult process, just new, or different than you may be used to.
Getting Up To Speed 🏃♀️
First, if you don’t know what staking is, let’s catch you up to speed. (If you’re already familiar with staking, proof of stake, and Ethereum 2.0 — you can go ahead and skip to Step 1).
Staking can be broadly defined as the act of locking up your crypto assets to receive rewards. More specifically, staking is the process of actively participating in validating transactions, or maintaining the truth of the network (similar to mining) on a proof of stake blockchain (more on that next). On these blockchains, anyone with a minimum-required balance of a specific cryptocurrency can participate in confirming transactions and earn a share of the protocol’s revenue.
Proof of Stake > Proof of Work 🔌
The Proof of Work (PoW) consensus mechanism requires miners to run nodes (the weird structures you see in warehouses) and expend computational energy to solve complex mathematical problems in a competition to mine the next block. The miner that solves the math problem first wins the reward for that block, in the form of that blockchain’s native asset (i.e. Bitcoin miners get rewarded in BTC).
The electricity required to run all the CPUs and graphics cards that solve these mathematical problems is what makes PoW unfriendly to mother Earth. Cryptocurrencies like Bitcoin, Litecoin, and Dogecoin all use proof of work with no current plans on switching to proof of stake.
Proof of Stake is a consensus mechanism where the main idea is that users can lock coins, and at particular intervals, the protocol randomly assigns the right to one of them to validate the next block. Therefore, unlike proof-of-work, validators don't need to use significant amounts of computational power because they're selected at random and aren't competing.
In Ethereum 2.0, one of the goals is for PoS to level the playing field for more regular folks to participate in earning a shared return on maintaining the truth of the Ethereum network.
Eth2 refers to a set of interconnected upgrades that will make Ethereum more scalable, more secure, and more sustainable.
In other words, Ethereum 2.0 is the switch from PoW to PoS on the Ethereum blockchain, along with some other upgrades that support the vision below.
The vision for Eth2.0 ✨
More scalable 🚀 switching to proof of stake allows the Ethereum network to process more transactions per second
More secure 🔒 as the network grows PoS is more secure against all forms of attack
More sustainable 🌳 PoW requires immense amounts of computing power and energy to secure the network. PoS is much better for the environment
P.S. This post is not sponsored by Lido, Curve, Convex, Yearn, Zapper, or anyone else, we chose these protocols for this guide because we use them ourselves.
Step 1: Staking ETH on Lido Finance 💧
The first step to getting the most out of holding our Ethereum is to stake it on Lido Finance.
What is Lido❓
Lido attempts to solve the problems associated with initial ETH 2.0 staking - illiquidity, immovability, and accessibility. By making staked ETH usable across the DeFi ecosystem, and allowing for participation with any amount of ETH to improve the security of the Ethereum network.
Lido is a really useful platform because it allows us to stake our ETH without having to commit to keeping it locked up for an indefinite amount of time. Traditionally, when you are staking your ETH for ETH2.0, you wouldn’t be able to withdraw it until transactions are enabled on ETH2.0 (you also have to have 32 ETH to self-stake!). With Lido, there is no minimum deposit, and we receive tradable stETH tokens that can be staked again for even more rewards! Money legos!
What is this stETH❓
stETH is a token that represents staked Ether in Lido, combining the value of initial deposit + staking rewards - penalties. stETH tokens are minted upon deposit and burned when redeemed. stETH token balances are pegged 1:1 to the ETH that is staked using Lido. stETH token balances are updated when the oracle reports changes in total stake every day. stETH tokens can be used as one would use ETH, allowing you to earn ETH 2.0 staking rewards whilst also benefiting from yields across other decentralized finance products.
Can I un-stake❓
It’s not possible to un-stake your ETH with Lido until transactions are enabled on ETH2.0. To get around this, Lido gives stakers stETH tokens (correlated to how much ETH they staked) to allow users to stake their ETH without losing the ability to trade or otherwise use their tokens.
What is the Annual Percentage Rate (APR) ❓
It varies slightly, you can find the current APR on the staking page.
Connect your wallet to stake.lido.fi
Type in how many ETH you’re staking
Click “Submit” and confirm the transaction in your wallet, after you confirm the transaction, you should receive the stETH tokens shortly.
Check out the Lido docs for more info.
Step 2: Providing Liquidity on Curve Finance 💦
This is where it can get confusing, but try to stay with us. If you’re still having trouble, you can always join the Discord and one of us will help you personally!
Curve’s website can be intimidating at first, the old-school programmer design and amount of tabs can be quite overwhelming. Don’t worry that’s why we’re here!
Curve Finance is a decentralized exchange focused on stablecoins. By focusing on stablecoins, it’s able to offer traders extremely low slippage, and liquidity providers enjoy little-to-no impermanent loss.
Other decentralized exchanges like Uniswap, SushiSwap, Bancor, and PancakeSwap allow anyone to add their assets to different liquidity pools, and earn fees. Locking up crypto assets in these liquidity pools to generate rewards is called yield farming or liquidity mining!
Liquidity Pools 🏊
Unlike traditional finance exchanges that match a buyer and a seller, Curve and all other decentralized exchanges are different, they use liquidity pools.
If you’re new to crypto and DeFi, liquidity pools can be a tough concept to grasp. Liquidity pools are pools of tokens that sit in smart contracts. These pools of tokens are what allow you and me to go trade tokens easily on a decentralized exchange without affecting the price.
In this example, we are adding stETH to the stETH/ETH pool on Curve, which allows other users to swap between stETH and ETH easily. Curve rewards us for doing this!
Liquidity Provider Tokens 🪙
Think of liquidity provider (LP) tokens like a deposit receipt that represents how many tokens you have staked in a specific liquidity pool. Once you deposit tokens into a liquidity pool, you receive LP tokens that can go be put to use across the DeFi ecosystem to earn a yield on top of your yield!
After you have stETH in your wallet, go to the Curve stETH pool and connect your wallet to Curve
Type in how many stETH (or ETH) you would like to add to this pool
Click deposit (do not click “deposit & stake in gauge”)
Wait few minutes and you will receive steCRV tokens in your wallet
*Staking in gauge: One of the main incentives for CRV is the ability to boost your rewards on provided liquidity. Vote locking your rewarded CRV allows you to earn a boost of up to 2.5x on the liquidity you are providing on Curve. Although we are going to elect NOT to do this and just select “deposit” instead (you’ll see why in the next step)
Read the Curve docs for more info.
Step 3: Depositing Curve LP Tokens into Convex Finance💰
Congrats if you made it this far, we told you it wasn’t that hard!
The final step is to deposit the steCRV tokens that we got from providing liquidity on Curve into Convex Finance.
Another option is Yearn Finance (screenshot at the bottom), which is a similar platform and actually came before Convex. Convex and Yearn are yield generation protocols both built on top of Curve Finance, with Convex being new to the game and Yearn being around since July 2020. A bit of a dispute has come up because of it, dubbed “The Curve Wars” as protocols like Yearn and Convex compete for yield. While there has been some drama on Twitter, there’s no evidence that Convex has the intention of putting Yearn out of business, or even affecting the protocol’s yields at all. Both Yearn and Convex are useful services with unique aspects, so we’re leaving it up to you which one you wanna go with! We use and like both platforms!
On May 30th Convex flipped Yearn in terms of Total Value Locked 😱
Convex allows Curve liquidity providers to earn trading fees and claim boosted CRV without locking CRV themselves. In other words, the point of Convex is to provide Curve liquidity providers boosted rewards and liquidity mining rewards with minimal effort.
Connect your wallet to Convex Finance
Click the “stake” tab at the top of the home screen
Scroll down till you see “steth” and click on it
Type in the amount of steVRV tokens you wish to deposit, if it is your first time using the platform, you will have to approve your LP tokens by pressing the "Approve" button
After that transaction has confirmed, you can press the "Deposit and Stake" button to deposit your LP tokens to Convex
Read the Convex docs for more info.
To sum it up, we went from ETH -> stETH -> steCRV and deposited the steCRV tokens into Convex to squeeze the most yield out of our ETH as possible. Here’s the projected yield breakdown.
LDO APY = 5.77%
Base CRV APY = 3.36%
CRV APY (incl. 2.5x boost) = 2.61%
CVX APY = 7.85%
For a grand total of 19.79% APY on your Ethereum, not bad! (The rewards can grow too!)
P.S. You can replace Convex with Yearn Finance in this step if you wish.
The steps will be exactly the same on Yearn and it will look like this (crvSTETH & stethCRV are the same LP tokens, Yearn and Convex just label them different, annoying we know 😐).
What now? 🤷♀️
Sit back, relax, and watch your portfolio grow. If you have other cryptocurrencies in your wallet and want to track how your portfolio is doing, some resources that we use and love are Zapper.fi and Zerion.
(No links in this article are sponsor or affiliate links. All the resources linked we personally use or have used and recommend. If you’d like to sponsor an article and you think you’re a good fit for Zoomer Money, DM us on Twitter).
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