Coinbase Prime expands its staking offer with ETH | by Coinbase | August 2022
Tl:dr: We are launching Ethereum staking for US institutional clients on Coinbase Prime. With our industry-leading cold storage, customers can now generate yield by staking ETH.
By Aaron Schnarch, Vice President of Product, Custody
Fully integrated staking on Coinbase Prime
Coinbase Prime provides institutions with an end-to-end staking experience. Customers can create a wallet, decide how much to stake, and initiate staking from the ETH Assets page on their Coinbase Prime account.
Securing client funds is our top priority. We hold the withdrawal keys in our cold storage vault at all times, which means that the staked ETH and the accumulated yield are always safe. To further ensure the security of client accounts, staking transactions must first reach consensus before being executed.
ETH versus ETH2
The term eth2 has been frequently used to describe an Ethereum network upgrade that aims to improve network security and scalability. This upgrade involves a change in Ethereum’s security model from mining (“Proof-of-Work”) to staking (“Proof-of-Stake”).
Once a customer stakes their ETH, our system uses the ETH2 ticker to represent those staked ETH tokens. Note that there is no separate/new “eth2” token or asset. The price of ETH and ETH2 is identical. After the upgrade to the Ethereum network is complete, the ETH and ETH2 tickers will merge into a single ticker: ETH. The merger is currently expected to take place in September 2022, so in the future you will likely see the term ETH2 fall out of use.
Why Institutions Stake
Staking can offer passive income on assets already held by providing useful work in the form of security to the underlying blockchain. The Ethereum blockchain rewards stakers who do a good job, but also punishes those who fail in their duties, for example by having downtime. This is why it is important to bet with a reputable and efficient provider to earn maximum rewards while minimizing risk.
Staking rewards for most assets can be viewed similarly to compound interest, much like in traditional markets when dividends are reinvested. Since staking rewards are paid in the staked token, users can “reinvest” those tokens to receive a higher payout in the next period. Additionally, staked tokens are usually stored in their respective wallets, meaning users earn yield without rehypothecation.
Stake on Coinbase Prime
With Coinbase Prime, institutional clients have the ability to stake their ETH and a number of other assets to start generating returns. Staking is also supported for Solana, Polkadot, Cosmos, Tezos, Celo, etc. Learn more about institutional staking in our Staking 101 for Institutions article.