The promise of being able to stake Ethereum (ETH) coins has been one of the most attractive aspects of the project upgrading to Ethereum 2.0, and switching from PoW to PoS. Staking itself is one of the most popular activities in the DeFi sector, and the ability to be able to do it with the project that is the father of DeFi has been very highly anticipated.
While the upgrade to ETH 2.0 is still ongoing, Ether already has a staking solution, called Lido Finance. Now, according to its recent blog post, hardware crypto wallet maker, Ledger, decided to integrate this staking solution as part of a new partnership, in hopes of increasing the accessibility and awareness of the solution, but also for boosting liquidity for independent stakers throughout the crypto industry.
The problems of ETH staking
As mentioned, staking is one of the most popular DeFi activities, and it revolves around purchasing coins, locking them up, and receiving rewards for doing so. It is a perfect way for HODLers to earn more money while they wait for their money to become more valuable. At the same time, staking contributes to the sustainability of the network to which the staked coins belong, so in short, everybody wins.
Of course, that may be true for DeFi, but attempts to stake Ether in the past were quickly abandoned after meeting major economic hurdles. For example, right now, it would cost users approximately $100,000 just to become a network validator at Ethereum 2.0. This would be fine for institutional investors, or millionaires who are in crypto for fun, but most people cannot even dream of matching that price.
Of course, there are still centralized Ether staking options, which are available on cryptocurrency exchanges. One example of this is Coinbase, the largest US crypto exchange. Another is Kraken. However, both of these platforms once again make it impossible for users to engage in staking due to major entry fees. Not to even mention trust concerns that are involved with any centralized business offering to keep users’ money.
After all, people are in crypto for its decentralization, and going to centralized exchanges to stake ETH would go against the point of using crypto in the first place. Obviously, no matter the approach, until now, there was no way to stake Ethereum cheaply. This issue has been a part of the industry for so long that a number of solutions emerged along the way. For example, Ledger interface offered users to ability to stake in a decentralized way, through the consensus mechanisms of Tezos and Polkadot. However, people wanted Ethereum, and so Ledger tried a different approach that might finally work.
How will the new solution work?
The new approach, as mentioned, is the partnership between Ledger and Lido, which is eliminating high entry barriers, and it set a precedent, allowing users to stake a lot lower amount of Ethereum. Unlike ETH 2.0 staking, which requires 32 ETH to start, that is.
This is important, as Ethereum is taking its first steps on a brand new frontier with Ethereum 2.0, and this point in its evolution is going to be a major game-changer. Processes like staking and lending will offer new opportunities, and they are expected to draw in great new audiences that will want to participate.
The new partnership will reward those who wish to do so by also granting all those who stake ETH through Lido by granting them stETH in exchange. These tokens can be sent, received, sold, or exchanged via the services such as Paraswap. These tokens will still match ETH at a 1:1 ratio, and they will now be supported by the Ledger wallet. However, they will grant users greater possibilities than ETH itself, which is one way of solving the problem indirectly.