Last month Kraken launched its Ethereum 2.0 staking service, which makes it easy for ETH holders to earn rewards of approximately 5% or more and help support the upgrade to Ethereum 2.0.
Staking is an opportunity that is only appropriate for clients who want to hold their ETH long-term, because staked ETH cannot be unstaked and, along with staking rewards, cannot be transferred for an unknown period of time (because it is uncertain when exactly transfers will be enabled on the Ethereum 2.0 network).
The launch has been a huge success, with clients already staking more than 350,000 ETH through Kraken.
Due to the extreme popularity of Ethereum 2.0 staking, not only on Kraken but across the entire network, it currently takes about 3 weeks for a new validator to go live on the network and start earning rewards (the Ethereum 2.0 protocol limits the number of new validators to 900 per day). This means that newly staked ETH currently does not start earning rewards for approximately 3 weeks.
When we first launched our staking service, we allowed newly staked ETH to share the rewards, even if the validators behind that new ETH hadn’t come online yet. While this meant that new stakers could start earning rewards more quickly, it also meant that old stakers were earning a lower reward.
To make the staking rewards on Kraken better aligned with the network rate, we are introducing a bonding period for newly staked ETH. This means that when you stake new ETH with Kraken, there will be a waiting period before you start earning rewards. After the waiting period, however, you will get a higher reward because you won’t be sharing the reward with new stakers.
Note that this waiting period is not unique to Kraken. The long delay in adding validators is an issue across the entire network. So even if you stake ETH yourself directly on the network, you will still have to wait before earning rewards.
How long is the bonding period?
To start, the bonding period will be set at 20 days. This means that new ETH stakers can expect their rewards to begin accruing 20 days after staking on Kraken. Going forward, the length of this bonding period is expected to vary depending on network conditions.
When will the new bonding period go into effect?
The bonding period goes into effect immediately, so any newly staked ETH will be subject to the bonding period before earning rewards.
How long will it take for the reward rate to normalize?
Since the bonding period is 20 days, it will take this many days for bonding to become fully effective at normalizing the reward rate. This means that the reward payouts will gradually normalize over the next few weeks.
What about clients who may have received a lower reward before the bonding period was introduced?
We have identified the accounts of clients who staked with Kraken before the bonding period was introduced, and may have received a reward that was smaller than expected as a result.
If your account may have been affected, we have already emailed you. There is no need to respond or contact Kraken at this time.
Affected accounts will be credited at a future date and we will send a second email once all credits have been issued. It may take up to 4 weeks to accurately determine credit amounts and get everyone credited.
Take advantage of our ETH2.S/ETH market (NOT available in the US or Canada)
As previously announced, we have listed a market for trading between staked Ethereum 2.0 (ETH2.S) and unstaked Ethereum (ETH). This market is represented by the ETH2.S/ETH trading pair. It has a number of advantages:
- While staked ETH cannot be unstaked, it is possible on Kraken to sell your staked ETH (ETH2.S) for ETH.
- If you buy staked ETH (ETH2.S) on Kraken’s market, you do not have to wait to earn rewards, because the staked ETH on the market has already gone through the bonding period (you cannot trade ETH2.S that is still in the bonding period).
- Staked ETH (ETH2.S) is currently trading at a slight discount on the market, meaning you may be able to get a bit more staked ETH through the market than you would just by staking.
There are important caveats about the ETH2.S/ETH market, however: The market may have limited liquidity. Price slippage in market orders should be expected and it may be difficult to exchange staked ETH for unstaked ETH in large amounts or at all. We offer no guarantees of any kind about the continued availability of this market – it may not be available for the duration of the Ethereum 2.0 transition. And again, this market is NOT available for users located in or residents or citizens of the US and Canada (these clients can stake ETH, but not trade their staked ETH for unstaked ETH).
Finally, keep in mind that staked ETH cannot be unstaked and, along with staking rewards, cannot be transferred for an unknown period of time. Make sure you understand the details of the Ethereum 2.0 network transition and our fee structure before staking on Kraken.
Thanks to the Ethereum community for making Kraken the leading staking service. We’re proud to help support the transition to Ethereum 2.0 and look forward to exploring all the benefits of the upgraded network together.