What Exactly Do You Do with Ethereum? Stake or Invest?

These days, it feels as though interest in Ethereum is reaching some sort of climax, as prices reach record highs.

But, what exactly do you do with Ethereum? What can you do to take advantage of this digital asset? The answers to both questions come highly nuanced, and with many potential outcomes, for Ethereum is not just something you can use for financial transactions – it is far more than a virtual currency. 

For most users, perhaps the most relevant uses of Ethereum are the generation of staking rewards and keeping it as an investment. Read more about these uses below. 

Ethereum 2.0 staking

The upgrade to Ethereum 2.0 or Eth2 did not only bring with it the benefit of superfast transaction speeds and greater scalability. It also introduced a new way of validating transactions: staking.

Compared to the old way of transaction validation, which is a “proof of work” model or mining, staking follows a “proof of stake” solution which does not require powerful computing machines to solve sophisticated mathematical problems. Users only need to show proof of their stake in the Ethereum network, which is a minimum of 32 ETH or around $62,000.

Users earn a staking reward for every transaction validated, which is a certain percentage of the ETH staked. According to Coinbase, this can be in the range of 3% to 7.5%. That’s around $1,860 to $4,650 for a 32 ETH stake.

Staking is not going to be as easy as it sounds, though, given the amount required to participate in it. However, there are Ethereum staking service providers that offer staking pool platforms, which consolidate ETH from various users to come up with the amount needed to participate.

Using Ethereum as an investment

Not interested in earning rewards from staking? There’s the conventional crypto-as-investment route. Users can obtain as much ether as they possibly can and wait for the price to rise to rake in the gains.

Just like other investment activities, this comes with risks and there is no guarantee that it will result in gains. It would help to bear in mind the following reminders.

• There is no way to predict cryptocurrency. Everyone is on a level playing field when it comes to cryptocurrency investing, which is likely why it attracts so many investors.

• It is a waiting game. Those looking to make quick short-term investments will find that Ethereum does not respond well to sudden changes. It is often best to make investments for the long-term and watch the rates rise and fall.

The right time to invest in Ethereum is yesterday or when it was still in its early stages and the prices were low. However, it’s not too late to invest in it. Remember how everyone thought Bitcoin was already going downhill past the $20,000 price level a couple of years ago? Bitcoin has recently hit over $57,000.

The same can happen to Ethereum. It’s not impossible for it to follow the same path considering how many investors are looking for the next Bitcoin now.