The arrival of ETH 2.0 staking is one of the most exciting milestones in the Ethereum history book. The ability to become a validator, stake Ether, earn rewards and support the future of the worlds largest distributed network. There is great potential for to leverage idle or excess Eth towards staking and staking pools to generate passive interest-based income from staking on with Staking-as-a-Service.
Today’s biggest challenges for future stakers is not just learning how to stake, or accumulating the pre-requisite, 32 Eth. Selecting between a centralized and decentralized approach will be a head scratcher for many that wish to participate.
The evolution of staking is likely to undergo a whirlwind of changes. We first saw exchanges holding crypto for users, then came the arrival of thousands of consumer-focused digital wallets. The industry often begins centralized, but slowly moves towards a more decentralized approach.
For the purpose of this blog post, we will refer to decentralized staking as “dStaking”. If you need a reference for the various terminology, check out our FAQ.
In this blog post we will help analyze the differences and benefits of centralized and decentralized staking services.
What are the benefits of centralized staking services?
- Easier onboarding into new staking services
- Creating and managing staking wallet is simple
- Adding validators or funds for staking is fast
- Centralized staking is great for beginners
- Does not require elaborate infrastructure
- Centralized services maintains superior liquidy
Why use centralized staking services?
Centralized staking providers are already operating and providing the ability to stake crypto, but not Ethereum (yet). These decentralized services are usually provided by crypto exchanges, such as Binance. Users can simply deposit or transfer their existing funds into the exchange and they will handle the rest so users can start staking.
However, it’s important to note that the exchange or services provider has effective control over your funds. Because centralized staking-as-a-service holds your private keys, if the exchange is hacked, that means your assets could be at risk.
Exchanges and centralized service providers do make the process of staking very easy, especially if they are already holding your assets. Exchanges like Binance and Coinbase are enlarging their service offerings and finding ways to keep users locked into their ecosystem – even if it’s not the optimal solution for all users. When it comes to staking, you will soon find out that there is no “blanket solution”.
Who should use a centralized staking service?
- Beginner and intermediate stakers
- Users that wish to stake in a pool
- Users with low volume of crypto
- For any user seeking a simple staking set-up
- For users already in an exchange and wishing to stake
Decentralized Staking Services (dStaking Services)
What are the benefits of decentralized staking services?
- Stakers maintain complete control over their private keys
- Security and protection from fraudulent activity
- Eliminates the need to build and operate nodes
- Decentralization is the only option for greater control
- Becoming easier to onboard users with less complexity
- Greater availability and non-custodial options to choose from
The benefits of a dStaking places sole focus on maintaining control of private keys and asset ownership. Many investors, professionals and businesses simply can’t opt for a centralized solution. Their security threshold does not have room for any risk, hence why there is a growing base of dStaking service providers.
With dStaking, there is no need to place trust in a third-party to control and secure your assets. All of the responsibility and accountability stays in your hands, the user. This ultimately adds a layer of trust that your private funds are less susceptible to theft or being compromised. Key management is pivotal for security. More validators operating means more keys in need of management. That is where dStaking offers greater support.
These service providers will all likely adapt their own unique approach to dStaking and technology is an important factor. The validator keys and key manager typically require a lot of setup and constant uptime. Instead, stakers and validators can rely on trusted third-parties as operators to host their staking services (tech, hardware, maintenance, etc).
As Ethereum 2.0 continues to roll out, more providers are offering dStaking solutions that require less management for the validator. Eliminating barriers to entry makes it easier to onboard users and offer more secured staking services.
Who should use a decentralized staking service?
- Advanced stakers and validators
- Any user looking for a non-custodial solution
- Security-conscience professionals, stakers and validators
- Users that wish to maintain sole control of their private keys
- For holistic users that wish to further support decentralization
- Users that wish to not rely on a centralized service provider
- Users that wish to securely stake without infrastructure
- Large volume ETH investors and stakers
Blox Staking is one of the industry’s first solutions for providing open-source and custody-free staking services for Ethereum 2.0.
For users that wish to participate in Eth 2 as a validator or staker, but do not want to surrender their private keys, they can trust in Blox to provide the necessary infrastructure to reliably support staking at scale.
Our custody-free solution means users have the freedom to choose the type of staking validator they want to be.
Why choose Blox Staking?
In the birthing phase of Eth 2.0 staking, only a select few providers will be non-custodial. Blox are blockchain pioneers that have mastered the craft of building, deploying and maintaining reliable blockchain nodes, apps and services.
In the matrix diagram below we analyze the advantages of using Blox Staking versus other centralized, custodial and DIY alternatives.
Blox has built a staking service that focuses on three-core pillars:
Our non-custodial solution lets you stake without surrendering private keys to third-parties, preserving your access and control. Our non-custodial approach to staking means that users leverage Blox’s reliable infrastructure to host the users validator and staking services.
For advanced users, the security conscience and enterprise-grade users, our custody-free solution lets you break free to vulnerable, centralized services.
Becoming a validator and staking supports the future of the network while rewarding the participants. A noble endeavor. We want to ensure Blox Staking users maximize their staking rewards. Our services mitigate the potential for costly penalties with our active slashing protection. And there is no time offline. Blox reduces downtime and keeps your nodes online and always staking.
Our secure staking environment ensures that Blox databases, keys and services are protected by Hasichop Vault. This Hashicorp service is a powerful tool for storing and securing “secrets” like private validator keys, for example. Coupled with our proprietary Blox KeyVault, we provide users with a secure method for generating and protecting their private keys. To check out more of Blox’s features, check out the home of Blox Staking.
Want to learn more about staking, validators or Eth 2.0? We got you covered.
Blox encourages you to continue monitoring the space for the latest news, support, progress, updates and more. It’s a bold new future for the world of Ethereum, blockchain and the millions of followers around the world.
Written by: Team Blox