How to Earn the Highest ETH Staking Rewards

Ethereum staking provides a way for long-term crypto investors to earn income on their ETH. With little additional risk to holding Ethereum, thousands of ETH holders are staking their tokens to earn rewards. Currently, over $90 billion worth of Ethereum is staked to the Ethereum Beacon Chain.

Nearly two years since Ethereum's merge to proof of stake, there are various options for staking Ethereum. Users can earn higher yield through a plethora of DeFi and LST-Fi opportunities, such as yield trading on Pendle and restaking on EigenLayer.

In the article below, we'll delve into how you can earn the highest ETH staking rewards, highlighting opportunities for you to maximize your yield.

Finding the Highest Ethereum (ETH) Staking Rewards

Investors are faced with various options for Ethereum (ETH) staking, each presenting their own unique balance of risk and reward. It's important to understand that higher rewards often come with higher risk (although not always the case). For example, now bankrupt platform Celsius offered above average returns in 2021, and the platform now out of business due to the additional risk it took on to earn that yield.

Additionally, there are maintenance considerations you should take into account before staking your Ethereum. While solo staking can offer some of the highest risk-adjusted returns on your ETH, it requires investment in hardware and a minimum of 32 ether ($96,000 at the time of writing).

On the other hand, liquid staking tokens (LSTs) allow for greater liquidity of staked assets. Users can stake their ETH by swapping for an LST, with no minimum investment, maintenance, or lockup periods. Simply hold the LST and staking rewards will accrue to your crypto wallet.

Once you own an LST, you can use the token in DeFi to earn extra rewards. EigenLayer, a restaking protocol with $10B+ in deposits, allows users to earn EigenLayer Points with their LSTs. These points are currently valued at $0.18 each, representing over 20% annualized APY.

What Are Ethereum Staking Rewards?

Ethereum staking rewards are given to stakers who secure Ethereum's blockchain. These rewards are paid for by miners, as well as through token emissions, to incentivize stakers to verify blocks on Ethereum's blockchain.

This process is integral to the functioning of Ethereum and offers a passive income stream to stakers.

Highest ETH Staking Rewards from Liquid Staking

Liquid staking platforms typically offer less than solo staking, but it's far more convenient for most investors. Lido's stETH and Frax's sfrxETH are two options for ETH staking, both providing rewards between 3% and 4%.

Many investors earn passive rewards by simply holding a liquid staking token. However, DeFi users often earn the highest ETH staking rewards. This is achieved by farming airdrops, providing liquidity, or trading yield tokens.

Highest ETH Staking Rewards from DeFi

As the liquid staking space matures, more options have become available for those looking to earn extra yield on their staked ETH. Two of the most prominent examples are Pendle and EigenLayer. Pendle is a yield trading protocol that allows investors to lock in yield, long yield, and provide liquidity to earn some of the highest ETH staking rewards.

Investors can currently earn up to 40% APY on their ETH via Pendle, largely thanks to its integrations with LSTs in EigenLayer's ecosystem. EigenLayer is seen by many as the best opportunity to earn the highest ETH staking rewards. This is achieved through an innovative approach called restaking.

Restaking on EigenLayer, using LSTs such as stETH and OETH, provides users with the underlying LST yield plus EigenLayer Restaked Points. Restaked Points will likely result in an airdrop of EIGEN tokens, with the market pricing these Restaked Points at $0.18 each. This implies over 30% APY on restaked ETH, one of the highest available rewards currently on offer.

Solo Ethereum Staking: Best Risk-Adjusted Returns

For those with the necessary expertise and resources, solo staking can offer the best risk-adjusted returns. It requires a minimum of 32 ETH, adequate hardware and ongoing maintenance but can provide higher rewards (5% - 7%) than LSTs and mitigates certain risks associated with third-party platforms. However, the barriers to entry and technical demands are significant. But, if you have experience in the Ethereum ecosystem and have some technical skills, this could be a route for you to explore.

How to Buy Ethereum

Before staking, acquiring Ethereum (ETH) is a prerequisite. Platforms like Kraken offer a secure and user-friendly way to purchase Ethereum. They provide a gateway for both beginners and experienced traders into the world of cryptocurrency investment, including ETH. To explore the more nuanced versions of staking, you will need to hold a non-custodial wallet like MetaMask and transfer your ETH there. 

Is Staking Ethereum Safe?

While Ethereum staking presents lucrative opportunities, it's not devoid of risks. These include smart contract vulnerabilities, market volatility and the potential of staking rewards being less than expected because of network changes. However, when approached with due diligence and a robust understanding of the ecosystem, staking Ethereum can be a relatively safe and profitable venture, just make sure to do your homework.