With Ethereum 2.0 it is possible to do staking, validate transactions and earn very interesting figures with very little effort. What’s great is that there is no longer any need to buy powerful GPUs and spend hundreds of euros on electricity: instead, all that is needed is a traditional PC and a bit of patience to configure everything correctly.
Well, in this step-by-step guide we’ll see exactly how to do staking with Ethereum 2.0, first on the Pyrmont testnet and then on the mainnet, in order to earn interest.
Staking Ethereum 2.0: what it means, how it works
The first version of Ethereum used Proof of Work (PoW) to validate transactions. This is the same system still used today by Bitcoin, in which users who decide to carry out the mining activity compete for the opportunity to validate transactions (sending coins from one address to another, for example), record the result on the blockchain and earn the reward for their work.
Specialized equipment is required to carry out the mining activity, generally consisting of dedicated hardware devices (ASICs) or, in the case of Ethereum, multiple high-end video cards (GPUs) connected in parallel. An important initial investment is therefore required to purchase the hardware. What’s more, since these devices consume a lot of electricity, mining only generates profit if the cost of electricity is low (e.g. photovoltaic panels with batteries are used).
Instead, Ethereum 2.0 uses the Proof of Stake (PoS) consensus mechanism, in which users “lock” their Ethereum (ETH) within a smart contract and are periodically randomly selected to validate transactions. Those who decide to carry out this activity are called validators and earn the commissions paid by those who have carried out the transaction. It is therefore no longer necessary to purchase expensive hardware equipment: a normal PC, preferably a low power consumption PC, is sufficient to reduce electricity expenditure and maximize earnings.
Staking Ethereum 2.0: how much can you earn
Everything sounds nice and interesting but, in concrete terms, how much do you earn from staking Ethereum? The answer depends on many factors, but the main ones are the total number of active validators (the fewer they are, the more you earn), the number of transactions (the more they are, the more you earn) and the level of clogging of the Ethereum system (the more it is clogged, the higher the commissions paid, the more you earn).
Many calculators simulating the return are available on the web, although the actual return varies enormously, depending on the parameters just mentioned. In principle, however, a gain of between 4-10% per year can be expected. Not bad indeed: for many of us who have an average salary, it means 2 extra months’ salary per year!
However, please note: at the time of writing, the functionality of the Ethereum system, which allows you to withdraw what you have earned, is not yet ready. It will be, presumably, at the end of 2022. From that point, we will also be able to collect any earnings from previous years.
Staking Ethereum 2.0: what is needed
Anyone can become a validator on the Ethereum network: it is sufficient to have the requirements and configure the system. Specifically, you need:
- A PC, desktop or laptop (see below)
- Linux from the command line: below we will report every single command to be given, but a minimum of skill with the command line in the Linux environment is still indispensable
- Fast and stable Internet connection: a traditional “home” ADSL is enough, as long as it doesn’t go down frequently. We’ll be moving several tens of gigabytes, so it’s essential that the line doesn’t have any traffic volume limitations.
- Stable power supply: the staking PC and the router that connects it to the Internet must remain switched on and operational at all times. If we live in an area where there are frequent interruptions, it is necessary to purchase an uninterruptible power supply (UPS) with a high-capacity battery.
The last two requirements are both very important: if in fact the staking PC will go offline (switched off or disconnected from the Internet) when it is selected to validate transactions, a penalty will be incurred and we will lose a few tenths of ETH as a “fine“.
Staking Ethereum 2.0: testnet and mainnet
Staking is not easy. A degree in computer science is not necessary, but some time is required and it is necessary to lock a certain amount of ETH.
For this reason, two networks are available:
- Testnet Pyrmont: it is a test network, in which everyone can participate freely and for free in order to become familiar with the tools and the configuration. There is nothing to earn, but it is possible to try the procedure safely
- Mainnet: it’s the actual Ethereum network, where the applications run and interest is really earned for the staking activity.
Those wishing to become a validator should first configure everything on the Pyrmont testnet and, once they have gained sufficient experience, switch to the mainnet.
There are small differences between the two, especially in terms of the hardware required. In the first part of this guide we will see how to prepare everything for staking on the testnet and then we will explore the process on the mainnet.
How many coins are required to do staking with Ethereum
32 ETH are required to become a validator on the Ethereum mainnet (32.2 ETH actually: the decimals are used to pay the costs of moving the coins from the wallet to the smart contract).
If you already own this amount you can do staking and earn interesting figures. At the time of writing, 32 ETH have a countervalue higher than €11.000: a figure not unattainable, but out of the reach of many.
It is also worth noting that these coins will be locked until about the end of 2022. In other words, we will not be able to have them back before that time.
However: before thinking about the mainnet it is opportune to configure everything on the testnet, where everything is free and it is not necessary to spend a single cent: we will earn “money without any value”, but the staking on testnet is an extremely interesting formative experience.
Staking with less than 32 ETH: staking pools
Those who want to earn from the staking of Ethereum even without possessing 32 real ETH can turn to staking pools: services that aggregate the few coins of multiple users to reach the threshold and do staking, and then divide proportionally the interest among the participants.
What PC to use for the staking of Ethereum (testnet)
In a Proof of Stake system, the PC does not need to be powerful: transaction validation requires very little computing power.
However, there are some significant differences between testnet and mainnet. As for the testnet, an old notebook is ideal, as long as it has a 64-bit CPU and at least 4 GB RAM.
In the recommended mode below we’ll have to download the entire Pyrmont test network blockchain, which is still just a few gigabytes: my test configuration takes up less than 50 GB in total. However, it is mandatory to use an SSD: old mechanical hard drives are too slow, and can’t keep up.
What PC to use for staking Ethereum (testnet)
If we ever succeed in getting on the mainnet one day, we will need a more powerful computer.
The CPU is not particularly important: any dual-core model equal or superior to an Intel Core i3 (or AMD equivalent) produced in the last 4-5 years is enough.
Much more important is the amount of memory: for staking Ethereum on the mainnet we recommend at least 8 GB of RAM. If you manage to invest a little bit more and get up to 16 GB, you’ll have more peace of mind: considering the figures at stake, it’s definitely worth choosing the superior equipment.
The real problem is the disk space: in the optimal mode, recommended below, we will be forced to download all the latest branches of the Ethereum blockchain, for a total amount of about 500 GB of data. So you already need an SSD of at least 1 TB.
Install Ubuntu 20.04
First, it is necessary to install Linux on the PC dedicated to staking. We will perform the installation and configuration first on the testnet, then, if necessary, we will proceed to format the PC completely and reconfigure everything from scratch before switching to the mainnet.
Any distribution is fine, but this guide provides for the use of Ubuntu 20.04: it is not the latest released version, but it is the one that guarantees extended support (LTS), with all the free security updates until 2025 (even until 2030, activating the paid subscription) and is undoubtedly the most suitable for a project of this type.
You can choose either Ubuntu Desktop or Ubuntu Server. In both cases either will work mostly from the command line, but the Desktop edition is recommended for less experienced users because it includes the familiar graphical environment and the web browser needed to activate the validator. The Server edition, on the other hand, is totally command-line and requires an extra step.
For all other steps, please refer to the source: https://turbolab.it/3050