4 Strategies For Staking Ethereum
Ethereum News

4 Strategies For Staking Ethereum

written by John Murphy | March 11, 2023

From liquidity pools to liquidity staking to looping, here are some approaches you can use for Staking Ethereum, grouped by Chinese zodiac signs. 

Steaked Ether ETH is trading at around $1,443 and is a liquid derivative. Smart contracts and bright blockchain jargon swirl. Still, there are several paths through the wilds of ETH staking. 

Ox Slowly And Steadily 

The typical Ox personality is strong and trustworthy, but stubborn and skeptical of new ideas. If this sounds like you, you might be interested in staking directly on Lido.  

Lido Finance is not only the largest liquidity staking derivatives (LSD) protocol, but also the largest decentralized finance (DeFi) protocol on the market in terms of total value ($9.5 billion) and market cap. Lido takes your ETH, deploys it through a team of vetted validators, pools the revenue generated, and distributes it to validators, decentralized autonomous organizations (DAOs), and investors.  

In exchange for providing ETH to Lido, the DAO will issue “stake ETH” (stETH) tokens. This is like a receipt (or “liquid derivative”) that can be redeemed for the original ETH and accrued earnings. 

Dog Honest, Calm, And A Little Resolute Personalitythe Fourth: 

If this sounds like you, check out Auto-Compounder. For example, add liquidity to Curve Finance and lock liquidity pool (LP) tokens. 

I like to use Frax-based tokens when using Curve. This is because the two protocols are clearly best fit for each other, and Frax pools often yield the highest rewards. I had a portion of my ETH bet on his Frax and received an LSD called Frax ETH (frxETH).  

That Tiger Slim, Sleek And Always In Control 

This is probably the most sophisticated strategy on the list and should be considered by experienced investors with large amounts of money. 

Basically, tigers can use similar strategies as dogs. In fact, there are many LP pools and compounders in the DeFi world, so finding the right one for you shouldn’t be a problem. The problem for tigers is how to hedge the risks. 

Some option contracts may be on track. The basic approach is to buy enough in-the-money put options to act as insurance in case ETH crashes. Since stETH tends to keep pegs, the risk of temporary losses is low, so this might be enough. (For those considering hedging against Depegg’s event, check out his Y2K log on Arbitrum.)  

Frog Ponzi Lovers Falling From The Sky 

The following strategy is very popular in some parts of the crypto world. When it comes to risk, it’s as safe as stocking up on peanut butter and chasing a pack of vicious chimpanzees.  

This includes “loops”. This means offering an asset, borrowing it, exchanging the borrowed money for the original asset, and repeating the process.  

From my own research, I found an income firm that deposits wstETH (which is the same as stETH, but with a harder bond) with a return of around 2% and can lend USD coins.

Meanwhile, USDC is trading at its 3.5% interest rate down $0.92. 

You can then exchange your USDC for more wstETH and repeat the process with an LTV of 75% to avoid being liquidated too soon. After repeating this process 5 times, wstETH has over 13% APY and wstETH itself gets 5%.