Investing in cryptocurrency has gone mainstream and people en masse have purchased Bitcoin, Ethereum, and various altcoins. But did you know that you can use your cryptocurrency to earn a return by putting it onto decentralized finance (also referred to as "DeFi") platforms, and that it is simple and frictionless? I was shocked to discover only 3.5% of holders of ETH have ever used a DeFi platform. That is such a travesty. I am making a series of posts to help people learn how to use DeFi to earn more on their tokens, and this is the first post in the series. This post will outline one way to earn a return on your ETH.
Put your ETH to work by staking it on DeFi to earn a return.
What to Know Before Staking Your Ethereum on DeFi Protocols
You will need to install an Ethereum wallet that can interact with DeFi.
You will need to an Ethereum wallet that can interact with DeFi platforms. MetaMask, which is a browser extension, is a good option for newbies (make sure you get the correct one from metamask.io). Once you have your wallet installed, transfer your ETH to said wallet.
Be prepared for high Ethereum fees.
Please note that interacting with the smart contracts costs fees in ETH and unfortunately these fees can be high although it fluctuates from time to time and platform to platform. You can adjust the fee by setting it lower in your METAMASK wallet (click 'Advanced' when the fee pops up and change the gwei to a lower number) but the lower you set it, the longer it will take to execute and it may never execute. I mention this to say that if you have a small amount of ETH it may not be worth it to put it into a DeFi platform. Like if you have .15 ETH and it ends up costing .05 ETH to put it on DeFi you have to wait a long time to earn that .05 back and then you need to remember it costs fees to take it off DeFi too. If you're willing to let it sit for a long time it can still earn you $ - you have to make that determination yourself.
Steps to Earn an Additional Return on your Ethereum on DeFi
This post is a step by step guide to earning extra APY by staking your Ethereum on SharedStake (and then staking the resulting token to earn SGT, SharedStake's governance token). This is one of the easiest ways to earn a return. The intricacies of how staking earns a return are beyond the scope of this post but, in short, staking is the act of depositing ETH to activate validator software responsible for storing data, processing transactions, and adding new blocks to the blockchain for the purpose of keeping the network secure. Staking your ETH to provide these services earns you additional ETH, which is where your return comes from. In this case, SharedStake takes care of setting up the validators and running related software and hardware - all you have to do is put your ETH on their platform.
Step 1: Navigate to SharedStake.org.
Step 2: Click 'connect wallet' to hook your wallet to the platform. Tip: Generally be careful when you agree to connect your wallet to any platform - only do it if you intend to interact with a smart contract on that platform and you're certain it's the correct website.
Step 3: Navigate to the 'stake' tab. The platform will display how much ETH you have in your wallet, a box to type in how much ETH you want to stake. and a 'stake' button. Enter the amount of ETH you wish to stake. It should be less than all your ETH because you need some left over to pay fees... Ideally .2+ ETH left over to be on the safe side.
Step 4: Click stake. You'll be asked to pay a fee to approve the platform spending your ETH and another fee to actually stake the ETH. See my note above on fees about changing the gwei if you want to lower the fees but if you do this your transaction will take longer and may never go through. (If you put gwei super low and you wait like a day and it still hasn't executed, you can always go to menu > advanced > reset account on MetaMask and start the whole transaction again.)
Step 5: Your ETH is now staked and earning a return. You will receive vETH2 which is the token you get from SharedStake representing the ETH you staked. When you withdraw your ETH you will receive an increased amount equal to what you deposited plus whatever your ETH earned.
Your staked Ethereum is continuously earning you a return over and above any appreciation in ETH itself.
Step 6: Then navigate to 'earn' and look for the box for "vETH2"...this allows you to earn SGT (SharedStake's governance token currently worth around $80 a token) on your vETH2. If you want to do this, then fill in the amount of vETH2 you want to stake and hit deposit or stake. Again you'll be prompted to pay a fee to approve the spending of your vETH2 and a fee for the staking of your vETH2. Once the vETH2 is staked, you'll see the amount of SGT you've earned start to increase. You can harvest the SGT at any time using the harvest button. Note that this will incur fees.
Step 7: You can also stake SGT on the same 'earn' page (using the 'SGT' box) to earn more SGT. It's pretty easy to see how this can all start to add up fast: First you get the benefit of any appreciation in your ETH, then you're earning on your ETH by staking it and getting vETH2, then you're earning SGT on your vETH2 (if you stake your vETH2 as described in this step) and then, if you stake any SGT you earn, you're earning more SGT. Compare that to just holding ETH in your wallet where the only thing you earn is any appreciation on ETH. (It's only another month or six weeks when you'll be able to earn SGT mentioned in this step and the one before so keep that in mind.)
How to Withdraw Your Ethereum
If you want to withdraw your ETH, you need to first unstake it from the 'earn' page if you staked it there to earn SGT. Now you have vETH2 (if you did not stake your vETH2 to earn SGT, then you already have vETH2). In order to get your ETH back, you need to change your vETH2 into ETH.
The first method is to withdraw your ETH directly on SharedStake's platform.
One way to do this is on the 'stake' tab of SharedStake's website. There may be times when you can't withdraw your ETH from SharedStake because of technical reasons beyond the scope of this post, but you have two options in this case. The superior one in my opinion is to just wait and try again later because the ability to withdraw your vETH2 to ETH on SharedStake will come back (again, it goes on and off for technical reasons).
The second method to withdraw your ETH is to use Snowswap to swap from vETH2 to WETH.
If you absolutely must unstake right away, you can go to snowswap.org and use their ETH2 pool to swap your vETH2 for WETH. WETH is wrapped ETH - you can unwrap it on many platforms - eg, airswap.io, radarrelay.com, Balancer and many others. Note that if you use this approach you may experience some slippage - i.e., receive back slightly less than you would if you just waited until you could withdraw on SharedStake itself. Also, this approach will probably incur more fees since you have to pay to swap from vETH2 to WETH and then pay to unwrap your WETH.
About the Author: DeFi Enthusiast is a former corporate lawyer and Harvard graduate who has been an avid user and investor of cryptocurrency for several years, dating back to mining Bitcoin on ASICs in 2011. She has been using DeFi platforms for years and believes that DeFi will eventually change the world. She began this blog to help educate people about how to use cryptocurrency, particularly as it relates to DeFi. She tweets about crypto @screwvencap (also known as DeFi egirl). If you have any questions, feel free to reach out.
