Bypassing Ethereum's staking queue

In this post, I will look at using Binances centralized staking solution to stake immediately with needing to wait 40 days in a queue

Ethereum staking

There are currently about 75,775 people waiting to stake Ethereum. If you decide to stake, you must enter the staking queue where your ETH will not earn rewards for the first 41 days. This is an intended mechanism of the Ethereum blockchain so too many new, and potentially disruptive, validators aren’t added all at once.

If you don’t want to wait there are other options. There are multiple services that are already staking coins and will allow you to buy into their stake. This is mainly done via a token. Today I will focus solely on Binance as I do not know enough about the others to go into any great detail. But just to briefly mention them.

Coinbase Centralized
Bitfinex Centralized
Lido Partially centralized
Rocketpool Decentralised

Binance

Binance allows you to stake 1 ETH in return for 1 BETH. Holding this BETH token gives you

Daily staking rewards
The right to swap back to ETH at a 1:1 basis

These rewards, given in the form of BETH, also earn rewards. Thereby BETH is auto-compounding.

You can also trade ETH directly into BETH on spot trading but while BETH has traded significantly below “fair value” getting as low as 0.88 ETH, it is currently hovering close to 1.

Premium?

Now the question is should BETH be only valued at 1 ETH?

Waiting 40 days to begin staking has a cost in and of itself. Let’s quantify it

Binance Ethereum staking is currently earning about 4.2% APY, not earning that for 41 days is a loss of 0.45% APY. Or in other words, if you staked 1 ETH today versus waiting 41 days you would have 0.0045 extra ETH.

In that way, I could make an argument for BETH trading higher. With a 0.075% fee perhaps it should be trading at 1.0038.

What's the catch

Now there are a few caveats to this, return and risk.

Return

First I should note that since last November Binance has started taking 5% from the BETH rewards. So right there is a disadvantage but I would argue that it is balanced by the fact that they are handling all the logistics, like managing the hardware for you.

Below I have an image of my personal returns that I have received from BETH since Sept 2022 (The merge). I also tried to track down returns that you would receive if you staked yourself. I found the chart below from LidoAnalytical while I can’t confirm these, I have no reason to doubt them.

With the 5% fee in mind, these seem mostly in line, at least until recently when BETH returns about 75% of the protocol APR. I can’t confirm why there is a recent divergence but I believe it is due to a new influx of ETH staking on Binance.

So while you start getting returns immediately, Binance themselves need to wait to stake. So for a few months, the number of BETH holders has gone up without the rewards increasing leading to worse rewards for BETH holders.

As I write this I have just realised that this is a big negative for old holders (like me) of BETH. While Binance has to wait to earn, new stakes earn immediately. Even if the amount earned is less than solo staking, that will return to parity once the queue shrinks. Therefore new stakers will earn something, sure a reduced something, but more than the solo staker that needs to wait 41 days.

That extra must be coming from somewhere, and that is old holders. So while this is in the “What’s the catch” section. I think this is just another positive to starting your stake on Binance. Though it may be a negative in the long term.

Risks

To begin running a validator comes with some risk, whether it is you running it or if it is a third party. Just recently there was a bug in a major Ethereum client that caused a significant number of validators to fail to finalize blocks. A major bug like this could lead to some or all of your staked funds being slashed.

But on top of that, there is one overarching risk, and that is you need to trust someone that is not you with your funds. And some would say that Binance is a bigger risk than most 3rd parties.

I won’t advise you to use Binance and neither should you listen to the advice of anyone online, but if you plan on using Binance anyway I do have an affiliate link that will save you some fees and also earn me a kickback. A quick note on affiliate links, don’t sign up just because of them but if you are signing up to a site anyway, search for one, as you will often save money using them. You don’t have to use mine but I advise you to use someone's.