With Ethereum 2.0’s (Consensus Layer) merge just around the corner, more and more businesses and institutions are looking to get into Ethereum staking.
Of course, this feature became available in late 2020 on the Ethereum network as the first drop in a series of updates to help transition Ethereum from Proof-of-Work (PoW) to Proof-of-Stake (PoS).
Since its introduction, scores of companies and investment funds have been getting involved, but many might be missing out on miner extractable value (MEV) with the way their staking infrastructure is set up and the providers they choose.
So today we’re going to run you through MEV and how you can stake Ethereum more efficiently so that you’re earning up to 70% more, rather than losing out to middlemen.
What is MEV?
MEV was known as miner extractable value but was later renamed to maximal extractable value. Simply put, MEV is the level of profit that a miner can make by either including, excluding, or reorganizing the order of transactions in a block.
Miners can opt to exploit techniques such as front-running, sandwiching, and back-running to boost their profits by taking advantage of market movements.
Bots, also called “searchers” are constantly looking out for these types of trades and if an arbitrage trade is found, the bot will place the order with the highest gas fee possible.
The fees paid to get these transactions through as fast as possible can be as much as 100% higher than the current average. This means that miners can earn more rewards from validating that block in the form of transaction fees.
This ability to prioritize these types of transactions allows miners in the POW ecosystem to earn more rewards from their activity.
When it comes to staking, no artificial rearrangement will be made possible. It will happen automatically and MEV will remain as an additional, randomly assorted reward. Still, whether you get it or not solely depends on the staking provider that offers the services.
Since the process of setting up a validator and a beacon node can be a little technical, most entities and individuals now opt for custodial solutions, completely cutting themselves out of MEV.
Furthermore, most staking providers do not even provide information about the extractable value. They are likely to keep the additional MEV for themselves, while you continue earning regular block rewards, rather than the full block reward plus optimized MEV.
How Can We Stake and Earn Optimized MEV?
Currently, there are 4 methods that you can use to stake Ethereum, but only 2 of those options will allow you to earn MEV.
So, let’s run through each method and explain why you do or do not get MEV by using that method so you can set up your Ethereum staking operations to be as efficient and profitable as possible.
Solo Staking Via Non-Custodial Provider – MEV
Solo staking via a non-custodial provider is arguably the sweet spot in terms of technical difficulty, cost of operations, and flexibility.
This allows non-technical executives to take full control of the staking process by dealing with a dedicated account manager to roll out and tailor the validator node. It requires no technical knowledge to set up or maintain and delivers MEV by default.
Being non-custodial, all Ethereum required for staking remains in your control and on your wallet, further reducing risks.
Launchnodes is known to be the leader in the provision of such non-custodial Ethereum staking services, trusted by most big names looking to stake.
The company’s clients can purchase nodes that will run on Amazon Web Services, without any exposure to risks tied to solo staking. Furthermore, it is a great solution for investment-grade staking, when one node is not enough, and the setup needs to be designed with geography and latency in mind.
In layman’s terms, this is what differentiates a secure professional Ethereum staking infrastructure from a retail ‘not your keys’ option.
You end up with validators you have full control of and earn full rewards from, with zero dependencies on third-party staking providers, including needing to log in or interface with 3rd party websites.
Staking Via an Exchange – No MEV
Staking Ethereum through an exchange is surprisingly popular, and thanks to the fact you can do it with as little Ethereum as you want, it’s only going to become more popular.
It requires no knowledge or care. You simply pledge however much Ethereum you wish to the Exchange’s staking pool and then take a share in the pool’s block rewards.
However, as you don’t own the validator node, there’s a good chance that the exchange won’t share the MEV with you, meaning that you’re losing out on potential additional income.
In fact, it is most likely that the exchange will never even tell you about the existence of MEV. Oh, and they will take a substantial cut of your rewards too.
This is also a custodial staking solution, meaning you don’t own the keys to your Ethereum the entire time it’s staked.
This is risky as the exchange could get hacked and your Ethereum could get swiped. Plus there is no way of knowing whether your ETH is being staked at all.
Therefore, it is the only option if you plan to stake less than 32ETH, but it shouldn’t be the primary solution for organizations looking to participate with 32ETH or its multiples.
Typical crypto exchanges that offer Ethereum staking are Coinbase and Binance.
Staking Via Own Hardware – MEV
If you’ve got an in-house team of tech experts that are up to the challenge, you can opt to stake Ethereum via your own hardware.
You will need 32 Ethereum to be able to do this, and the right hardware (starts with 2 GB Memory and 30 GB Storage space), capable of supporting all validator node’ activities.
The process of rolling the node out can be considered technical and is not advisable for non-technical teams or individuals. In the best-case scenario, you will need that tech team to support this process and to get your node up and running.
The second point to keep in mind is what beacon node to connect your validator node to. A technical path to becoming a rightful participant of the consensus layer is to run your own beacon, but its intricate setup typically scares most prospects off.
Still, there is a good solution to this and it comes courtesy of the previously mentioned Launchnodes. The firm offers shared beacon nodes, which enables solo validators to connect to professionally pre-configured beacons that require no additional tweaking.
Staking Via Third-Party Custodians – No MEV
Staking Ethereum via a third-party custodian is another option that many stakers opt for. It requires no hardware or technical knowledge from an end-user point of view, but it also means that you don’t own or control the node.
This in turn means that you’ll miss out on MEV as the custodian will not pass this additional earning on to you, just like exchanges.
Is Your Staking Provider Giving you MEV?
Staking Ethereum with your own validator or shared beacon node allows you to remain in full control of your Ethereum while earning MEV in the process.
This way, your staked Ethereum works harder and generates greater returns than is possible with other staking methods.
In some cases, this path requires no technical knowledge, making it perfect for companies of all shapes and sizes that are looking to get into Ethereum staking without breaking the bank.
It is completely up to you who you will be staking with but if you ask us, the decision is pretty clear.
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