You Can Now Earn Ethereum 2.0 Staking Rewards on Coinbase

By Jeff Benson

Two months after opening up its waitlist for Ethereum 2.0 staking, US-based cryptocurrency exchange Coinbase says some of its customers can now start earning rewards on their Ethereum holdings.

In exchange for locking down some of their ETH, Coinbase users can earn up to 6% interest annually.

In a blog post updated today, the exchange said it would be notifying users when they've moved off the waitlist and encouraged others to sign up in the meantime.

The Ethereum blockchain is in the midst of a move from its current proof-of-work network to a proof-of-stake one. What that means, essentially, is that instead of solving complex mathematical problems to create new blocks and gain mining rewards, the users who help keep the network chugging along will soon need to put up some ETH to do the same.

The upshot is that the network should become less congested and cheaper to use as decentralized finance (DeFi) applications and non-fungible tokens (NFTs), increasingly popular, make greater demands on the current blockchain.

To get Ethereum 2.0 up and keep it secure back in December, it needed "validators" (the proof-of-stake version of miners) to help create new blocks; the more validators, the more secure the network. Validators are compensated in Ethereum, so there's money to be add by locking up, or "staking," their tokens. The Ethereum 2.0 blockchain is now in Phase 0, with developers working to add functionality over the coming months and years until it becomes the main network.

Though there's a 32 ETH requirement to become a validator and run an Eth2 node, Coinbase is pooling together customers' holdings and running nodes on their behalf.

The good news is that you can stake any amount of Ethereum you own via Coinbase. The downside is that you won't be able to send, sell, or trade it at your leisure. "However," wrote the exchange, "Coinbase expects to offer a way to trade any staked Ethereum in the coming months."

Another downside is that the 6% interest isn't guaranteed but is instead tied to demand. The more ETH that people stake, the lower the rewards become. That's a byproduct of how Ethereum 2.0's own staking rewards are structured—a big chunk of ETH to start was helpful for security, but each successive token after that is subject to the law of diminishing returns. In fact, in February, Coinbase projected up to 7.5% APR on staked ETH, meaning Eth2 staking in general has been popular.

Coinbase also offers staking rewards for Algorand, Cosmos, Dai, and Tezos.  Other exchanges, including Kraken, also offer Ethereum 2.0 staking rewards.

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