Staking Ethereum
Since April 2021, I’ve been staking Ethereum and running my own node on the Ethereum network. I want to share with you what this experience has been like and why I did it. If you’re looking to do the same, or are curious what it all looks like, this article is for you. Part of the beauty of decentralized finance and cryptocurrencies is how personal they can get as you can truly own the token, a coin, or in this case, a piece of the network.
Here is the outline for today:
Minimum Requirements (Hardware & Ethereum Stake)
32 Ethereum per Validator
Let’s start with the elephant in the room. Yes, as of July 2021, new validators still need exactly 32.0 Ether in order to stake and run your own node. I know this is a lot, currently at the time of writing this article, July 6, 2021, Ether is at the price of $2,221.30 USD per ether. However, there are staking pools and lending options that will help you grind away and accumulate the required 32. Though not financial advice, if you have a crypto or other investment take off relative to Ethereum, you might consider selling it into Ethereum. This could let you more easily take advantage of the opportunity to stake Ethereum on your own.
I myself, was fortunate enough to start accumulating when the price was below $1,000. However near the end, to grab my last 4 Ether, I was paying upwards of $2,450 each. It hurt, and it really felt like I was getting very little in return for my dollars. However, I was bent and determined to get the full lot so I proceeded to buy them. The next 10 years will judge if I was stupid or genius.
The header for this section says 32 per validator. As you’ll see further down, you can actually run multiple validators on the same machine and therefore stake more Ethereum. This is actually a common case if you are one of the early adopters and grabbed a lot of Ethereum back when it was even cheaper. However, you must stake in even lots of 32.0 per validator. At last estimation one machine with strong hardware can handle 100 validators or 3200 Ether.
Device Hardware
This was a big question mark for me, so I went with a proven and tested NUC device that will be strong enough for the coming years along with sufficient storage. I bought the Avado i7 232, which has the following hardware specs:
- Intel i7 10710U
- 32GB RAM
- 2TB SSD
- Passive cooling with no fans
While not the cheapest option out there, it comes an integrated app store so all the required software is easily downloaded, installed and configured. On top of this, there is a near real-time Telegram support group where I can ask questions and get help. The device also includes an auto-update feature which was used during the Berlin hard fork and which I will use for the upcoming London hard fork.
Adding these all together, I felt the price of $1600USD was worth it given how much I have at stake. Given the price of Ether, and if this is your first node, I would highly recommend going this route for the simplicity and support.
Image Caption: This is how the hardware specs perform 99% of the time. CPU is nice and low and keeps cool, while the memory is heavily relied on. Disk usage started at 25% and has grown to 29% over the course of 2 months. Remember, 2TB SSD is used here.
Internet – Fast & Unlimited
Staking Ethereum privately requires you to have stable, unlimited, and fast internet with low latency. The faster you can attest and approve a block, the higher your rewards will be. If you have a lot of “space” or “distance” between your attestations when you will not receive as much reward as you could.
For bandwidth, the node uses about 500GB up and 500GB down each month. As the validator runs 24 x 7, it is constantly talking with both the mainnet and beacon chains at the same time. It’s possible after the merge happens that this will go down.
Definitions
Some quick definitions you will see throughout this article:
Beacon Chain: This is the proof of stake (POS) blockchain that you must run and stay synchronized with at all times. This is the future blockchain where Ethereum is going and will be merged with the proof of work blockchain the coming year. |
Mainnet Chain: This is the proof of work (POW) blockchain that you must run in parallel along with the beacon chain. This is also where you deposit your 32.0 Ether into. This sucker is massive, and the initial synchronization takes days to complete. |
Validator: This is the piece of software that runs the validation work for you. This secures the ETH2.0 network by validating and attesting new blocks on the beacon chain. |
Key Point: All three of these must run simultaneously on your validator box. |
Also note that the internet does not need to be 100% dedicated to the validator. We stream Netflix, work from home, and use our mobile devices all on the same internet connection.
Electrical Power
This was also a big concern for me as the device needs to run continuously. However, thanks to the NUC fan-less design and the mobile i7 processor, the power consumption is very low. The photo below is from the UPS which is powering the router, modem and Avado i7 232 device. This incredible setup only costs me $2.72 in electrical costs per month.
Image Caption: 35w is absolutely incredible when you consider 5-10w of those are going to power the router and modem. The alternative proof of work, or mining, requires much more power to accomplish the same service.
Requirement Summary
- 32.0 Ethereum
- Strong CPU, lots of RAM and plenty of storage
- Backup power supply
- Unlimited internet with low latency
- Able to run the machine 24 x 7
Expected Rewards & Penalties
Daily / Weekly / Monthly Returns
The screen shot below shows you the latest income from my validator. The income is credited to my deposit key every epoch which is roughly every 6.5 minutes. After this, these statistics update each day after you’ve completed another 24 hours of validating. Keep in mind this income is largely sourced from attestations which are simple validations or agreements that the latest proposed block is valid. Proposals are a different, and I’ll get into that next.
Image Caption: Note that the earnings are always paid in ETH not dollars or euro. Again, over time we will see if this is genius or stupid. The currency cannot be changed in case you were wondering.
Proposals
One of the coolest events, when you’re staking Ethereum, is when your validator is chosen by the beacon node to propose the next block. Your validator creates the block, aggregates the included transactions and puts it forward for other validators to attest. If accepted, you receive a much higher reward and it gives your weekly income a nice boost. In the two months that I’ve been running my validator I’ve proposed 5 blocks. The software handles everything and you don’t need to actually do anything. It really is amazing when a block on a public blockchain has your name on it!
Curious what a block looks like? Here is one. You can see just how many transactions are included in one along with some of the values being transacted.
Income Declining
When I started I was getting 8.0% per annum and it has been going down nearly every day since. This is because there are more validators joining and this lowers the staking rewards for everyone. In the screenshot below, you can see how the daily rewards are lowering each day. The spike on the left is from when I was chosen to submit a proposal that day.
Withdrawals
You should know that the proof of stake scheme in place with Ethereum, is under a lock up phase. Which means until mining and proof of work is officially merged over, and Ethereum goes 100% proof of stake, I cannot withdraw my rewards or the deposit.
This is done for two reasons which are in the interest of participants. Firstly, they need stability as they transition over to proof of stake. They can’t have people coming and going while they are trying to get this massive blockchain migrated over. Ethereum is the first major blue-chip crypto to move from POW to POS. Secondly, having a lock up period without a definitive end period attracts long term investors and prevents malicious actors from entering. This allows for Ethereum to get the staked value higher and then migrate over from when they are ready without fear of a malicious 51% attack on their proof of stake blockchain.
Penalties
It is true that if you miss a scheduled attestation or proposal your deposit account is debited. This penalty is roughly 2/3 of the reward you would have normally received.
This happened to me when I powered down the device and hooked up the backup power supply. However, once the device is back on and running, you quickly recuperate the losses and are earning again.
I have not yet been slashed, which is saved for bad actors that are attempting to corrupt the network. Although I’ve also learned that if you try to imposter another account that will result in slashings too. This can happen if you switch over hardware and use the same validator key and they think you’re now an imposture. So you actually need to give it 30 minutes between starting up with new hardware if you migrate to new hardware. These penalties can be sizeable as they are intended to penalize bad actors.
Why Not Just Stake Your Ethereum in a Pool?
Why not just join a pool and do that for staking your Ethereum? This is a terrific question and a viable option for most Ethereum investors who wish to stake their Ethereum. Especially if you have less than 32 ETH or you don’t want the hassle of running your own node.
I’ve included a link here to all the viable staking Ethereum 2.0 pools
Here are some of the reasons I chose to run my own node instead of joining a pool:
Improved Rewards
First, the rewards are better when you take on the additional risk of running and operating your own node. Compare the income statement and yield listed above from my own validator with what you can find on a staking pool.
Image Caption: The above image shows you the staking income you can earn through Binance’s ETH 2.0 staking program. Be aware that the returns you see quoted on pools will likely be lower because each day more validators join the network.
Decentralized
My node is completely decentralized and not part of a pool; in the chart below I fall under the independent category. I can attach my own MetaMask wallet to the RPC endpoint of my node and transact from there directly and save the exchange markup. I’m also not dependent on any exchange or service provider to manage my investment. However, this all being said, it makes me 100% responsible for everything.
Private Keys
Building on top of the decentralized nature of the node, I also own the private keys to the stake. Nobody else could mess around with my investment or change the rules of the pool on me. I alone control the keys, I alone know what they are and where they are physically secured.
I’ll take a moment to highlight the fact that cryptocurrencies are becoming more centralized as investors begin to trust exchanges more and lend out their crypto. There is an inherent counterparty risk here and investors of the most popular tokens and coins are relinquishing their keys in order to participate in many of these programs on the exchanges.
To me, knowing my private keys is important, and I only use exchanges on rare occurrences to trade into a different crypto or fiat before pulling them off onto my private keys or bank account. So, knowing I have a propensity to do this, it should make sense why knowing my private keys to my Ethereum stake is important to me.
Control
Building on top of the last, I have ultimate control and say over the investment and entitled to maximum rewards so long as I play by the rules. There is a distinct feeling of empowerment and control being able to see the physical box, know the keys, and better understand the innerworkings of how Ethereum proof of stake works. Here is a snippet of the log from the beacon chain. This is what Ethereum 2.0 looks from the dirty underbelly side!
Drawn Like a Magnet
Lastly, and its entirely subjective, I felt completely drawn to this investment like few others I have had in my life. Once I learned about the project and the future potential it held, I wasn’t just sold, I was drawn to it like a magnet and nothing was going to stop me from getting involved. I wanted the purest piece of it, which meant I had to own it outright, run and manage it myself.
I approached three other investors and offered to stake with them sharing the pie 50/50 and nobody took me up on the offer. I’m sure they had their reasons, but it wasn’t going to change my mind.
Since going live with the validator one of them has since come back saying he wishes he had joined in, but yet he still has zero Ethereum.
Steps to Starting Your Own Staking Ethereum Node
I’m going to step you through the high level steps for setting up and running your own Ethereum staking node. Please, if you are actually doing this, follow the official steps on the Ethereum launchpad as they are the official authorized source. Also, please reach out to me on Twitter and I would be very happy to help and guide you through some of the finer details.
1) Purchase the Hardware
You will need to purchase and receive the hardware for your staking machine. I of course, prefer the Avado i7 232 as previously discussed, but there’s no reason why you can’t spec out the pieces yourself. Just pay particular attention to power efficiency and cooling requirements. If you’re approaching 1600USD, then just get the Avado i7 and save yourself some hassle!
Bonus – They issue you the warranty certificate as an NFT! Cool!
2) Synchronize Mainnet POW Blockchain
The first thing you will need to do once you have your hardware setup and your operating system installed is to install a mainnet client and begin the process of synchronizing the Proof of Work (POW) mainnet blockchain.
I use the GETH mainnent client, but there are four listed out on the Ethereum Launchpad website that you can download and install for different operating systems.
Once you begin this process get comfortable as this can literally take days! So kick off the process and wait until it tells you that it has successfully synchronized to the head of the blockchain. Then you probably want to give it another day just to let it run and stay synchronized. This helps to make sure you don’t have any network problems and your internet is sufficient. Better to diagnose these issues now before you have initialized your stake.
3) Synchronize Beacon Chain POS Blockchain
Bonus – Add a backup RPC end point for the POW chain. You will want to specific a backup end point in case your mainnet falls behind or you have to restart and the re-synchronization is going to take another 1-2 hours. This is very easily done by adding the following argument to the command line:
--fallback-web3provider=https://mainnet.eth.cloud.ava.doThat will give you the Avado cloud mainnet but you can change it to any publically available mainnet service.
4) Create your Keys
Next we create our deposit and validator keys. I won’t get into it much here due to the sensitive nature of private keys and what is considered offside and acceptable to talk about. But please follow best practices and keep this part of the process exceedingly secure and tight. This, and the next step, are the most important and your future ability to withdraw and take your rewards depend on it. Follow the steps and commands precisely as outlined on the official Ethereum Launchpad website and triple check the URL is not spoofed.
5) Make the Staking Deposit
- Quadruple check the deposit address using at least 2 different sources to confirm you’re sending your ETH to the correct address
- I won’t list it here for risk of what this could imply, but get the address from Ethereum Launchpad, and then find another website that confirms this is the address too.
- Use Chrome as the browser
- Use MetaMask as your wallet attached to Chrome
- Have no other applications or plug-ins running
- Make it all in one deposit. All 32.0
- So you will need a little more than 32.0 to cover gas fees
- Once you make the deposit, you will be given a transaction hash immediately which you can click to monitor the progress of the deposit.
- It could take upwards of 10 minutes, but it will confirm the receipt of your deposit against your deposit key.
- Once the deposit is received, now it will take upwards of 48 hours for the deposit to be confirmed by the network. They do this to ensure it has been securely deposited and 100% confirmed by the miners.
6) Launch your Validator
Once your deposit has been received, and confirmed by the network, you will be slotted into a validator queue and begin waiting your turn to begin validating and staking your Ethereum. This can take anywhere from a matter of hours, days, or even weeks depending on how many are trying to start staking at the same time. But you will be told approximately when your validator will be activated.
In the meantime, launch the validator program that came with the beacon chain. You will need to load your validator key that you generated in the fourth step. This key is directly associated to the deposit key you used, uniquely identifies you, and ensures your validation activities go towards your deposit and not someone else.
Because you’re likely still waiting to be accepted into the queue, you will receive an error message on your validator to the effect that you haven’t yet been activated. Just let it keep running along with the beacon and mainnet chains Once you’re accepted in and your validator is activated you’re off to the races and successfully staking your Ethereum.
Image Caption: This status update is provided by https://beaconcha.in/ and you will end up using this all the time. It’s an incredible tool for monitoring how your validator is performing. Definitely use it and setup email notifications.
7) Attesting and Proposing
Once your validator is accepted into a beacon node, you will begin attesting, submitting new block proposals, and earning Ether with every epoch. These are the two activities your validator will do when staking Ethereum. So really, there really isn’t anything left to do but just let it run!
I do recommend you have a backup power supply to ensure your modem, router and validator stay up even during a power outage.
8) Maintenance
Maintenance on this thing is a breeze, you literally do nothing except check on the https://beaconcha.in/ website every so often. You can even configure email notifications so you are immediately alerted if anything noteworthy happens such as proposing a new block, or missing an attestation.
Because my Avado comes with auto-update, I don’t even need to update and maintain the packages that run the networks. They just update themselves and keep running. I just want to emphasis just how easy staking Ethereum is after you complete the initial setup. You can go days and weeks without checking in on it because if anything happens you’ll be notified by email.
Closing Thoughts & Final Arguments
Staking Ethereum offers investors the opportunity to be an active decentralized participant in the ever growing digital economy. At current writing, the daily settlement value on the Ethereum network is now over 30B, while Paypal is settling 2.5B a day. Why? Because DeFi is taking off and the value of the Ethereum network is growing each day. It can literally support any number of financial instruments and transactions from the simple to the complex. With near instant settlement, world-wide transactions can be settled with utmost confidence in a matter of minutes for a fraction of the cost when compared to traditional banking. Add to this, the energy efficiency of Proof of Stake, and Ethereum will be a complete solution.
ERC-20 Tokens
I’m not sure if you’re aware, but Ether is not the only token being settled using the Ethereum smart contract network. In fact, nearly 50% of the value transacted on the network is not Ether. Here is the complete list of ERC-20 Tokens. It just shows how powerful and trusted this smart contract network has become.
Non-Fungible Tokens (NFT)
A large number of NFT tokens are transacted on Ethereum. As more and more businesses adopt NFT’s and the potential for them, Ethereum will be relied on more each day. I have a detailed article on the future potential use cases for NFT’s. There is huge potential here – well outside of just digital artwork.
Energy Consumption
One common complaint or argument against cryptocurrencies is the vast energy requirements to support and run these networks such as Bitcoin. With Ethereum moving to proof of stake, the network will run at a mere 1% of its prior energy usage. Ethereum will become a viable competitor in all ways against all cryptocurrencies. While it may never topple Bitcoin as the pristine store of value, I believe it will crush most other DeFi competitors and assert its dominance for years to come.Future Sharding
Proof of stake also enables the next phase for sharding and evolution which will enable faster transaction speeds with a theoretical limit of 100,000 per second; Visa does 1,700 a second and fully supports the retail economy.
The future is immensely bright for Ethereum – but it is 100% contingent on them being able to roll out the 2.0 upgrade with proof of stake. If they nail this upgrade, it is onwards and upwards for Ethereum.
Final Final Words
Today, we have the chance to stake a small fortune and participate in what is, in my opinion, the opportunity of a lifetime. Once I had caught a glimmer of what was possible with this technology there was nothing stopping me from obtaining 32 ether and staking Ethereum with my own node.
Opportunity will not just stand there knocking away on your door.
— Stephen Wealthy (@mywealthmoney) July 8, 2021
It taps once, maybe twice, and then moves along.
Contact Me
If you or your organization need any assistance setting up and running an Ethereum node please contact me. I am very willing to help and assist in any way that I can. As I’m a self-employed consultant, I am willing and able to work on a temporary basis and execute a project like as this for you. My contact information is below, easiest way to reach me is on Twitter via DM.
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