loader image

Should you stake Ethereum on MetaMask or not?

Blockchain data reveals that most Dogecoin ($DOGE) owners are still making  a profit.
January 14, 2023
What Is A Ledger Wallet? An In-Depth Guide To Different Types Of Ledger Wallets
January 15, 2023

Staking capability for the well-known cryptocurrency wallet MetaMask has now been made available, allowing users to lock up their Ethereum with the new feature through Lido or Rocket Pool in exchange for cash incentives.

This entails that anybody with a MetaMask wallet may now quickly begin earning yield on any amount of ETH they’d want straight from their wallet, without having to negotiate what can frequently be challenging user interfaces on staking programs.

After all, staking involves some risk, and there is currently no way to unstake (i.e., get your ETH out of a staking contract). However, according to Ethereum developers, this capability will be available soon.


Staking Providers

Users who don’t mind taking risks may find success with staking. While the return percentages differ, according to MetaMask’s website, users may deposit ETH and receive a dividend of roughly 5.22% per year with Lido and 4.59% with Rocket Pool.

On Lido’s website, more over $6.9 billion in ETH are presently staked using the service, giving consumers an annual return of about 4.9%. Since Lido is a “liquid staking service,” customers that stake ETH through Lido get an equivalent number of Staked Ethereum (stETH) in exchange for their staked tokens. As a result, stakers can continue to utilise their stETH on other DeFi services and keep their ETH “liquid” while it is locked up.

Currently, stalled Ethereum trades at a little disadvantage to ETH. According to statistics from CoinGecko, while the price of ETH is now around $1,418, stETH is trading for $1,407.

According to statistics from Dune Analytics, Lido is presently the most well-liked staking service, accounting for 29% of all ETH staked.

Another liquid staking provider is Rocket Pool, which offers customers rETH in exchange for their staked tokens. However, it looks that Rocket Pool on MetaMask has already reached “limit capacity,” therefore users may only be able to stake ETH through Lido on MetaMask for the time being.

“We started rolling out yesterday at 10% with full roll-out today. We have seen an exciting engagement since the news went live four hours ago,” Mian said.

Beyond the two providers that MetaMask now makes available through its platform, there are more choices for ETH staking. Ethereum staking is also available via Coinbase, Binance US, Kraken, and Nexo, each with a different rewards structure. Only Coinbase and Nexo, out of those centralised providers, presently provide a liquid staking option, exchanging ETH for Nexo Staked Ethereum (NETH) or Coinbase Wrapped Staked ETH (cbETH) tokens, respectively.


Staking Advantages

Since Ethereum is a proof-of-stake blockchain, increasing the number of users staking ETH and operating validators globally should eventually make the network more safe and decentralised. This is advantageous for the network, which has come under fire for being more centralised than Bitcoin.

Some long-term investors who don’t have any immediate plans to sell or exchange their ETH holdings may also think that earning passive income through staking rewards is a no-brainer.

Staking Risks

The hazards of storing cryptocurrency with a third party exist. In the world of cryptography, it’s usual to say, “Not your keys, not your money.” Sadly, it has come to pass as the market suffers from the devasting repercussions of FTX’s implosion and Terra’s fall. Should owners ever trust their cryptocurrency with a third party, even as Gemini shuts down its “Earn” program in the wake of the failures of crypto lenders BlockFi and Celsius? What are the risks, in the opinion of Ethereum developers?

The parent company of MetaMask, ConsenSys, outlined the main hazards associated with ETH staking in a post last month. It specifically highlights the dangers related to hacked third-party software, flawed smart contracts, and significant token price swings.

Additionally, it brings up the potential hazards connected to bad governance decisions made through any associated DAOs, problems with code transfers, “legal ambiguity,” and the potential for stolen private keys. While there are many potential threats there, each one is feasible if the user breaches their own data or a strong third party decides to alter the game’s laws.

Staking Withdrawals

It’s important to understand that unstaking is not yet possible before thinking about staking Ethereum. This indicates that while your Ethereum may now be inserted, it cannot yet be removed. The fact that staking is now a one-way experience may come as a shock to some people, but Ethereum developers have plans to change that shortly.

Staked ETH withdrawals will be possible with the Shanghai upgrade that is planned for early this year.
Stakers will then be allowed to withdraw their rewards and/or principle deposit from their validator balance if they so want after the Shanghai update, according to the Ethereum Foundation’s website.

Withdrawals might start as soon as March, according to Ethereum engineer Marius van der Wijden, who spoke to Decrypt.

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

According to van der Wijden, while deciding whether to stake your Ethereum now or in a few months, Ethereum owners should listen to their intuition.

“The code for withdrawals is mostly done, but it still needs to be thoroughly tested before being rolled out,” he added.