Staking is a way to earn rewards on your crypto while helping secure the underlying network. With Ethereum staking, anyone can lock their ETH to put it to work on the network, allowing them to participate in consensus, validate transactions, and create blocks, thereby securing the network. Doing this work earn stakers ETH rewards, while doing it poorly can result in lost ETH due to penalties.
Liquid staking is a form of staking where you receive a receipt token in exchange for your staked funds. The tokens are liquid rather than locked up, so you can swap, send, or use your receipt tokens in DeFi. As long as you’re holding the liquid staking token, you’re earning staking rewards.
cbETH is a utility token that represents Ethereum 2 (ETH2), which is ETH staked through Coinbase. Over time, the price of cbETH will likely deviate from ETH because cbETH represents 1 staked ETH plus all of its accrued staking interest starting from when cbETH's conversion rate and balance were initialized (June 16, 2022 19:34 UTC). cbETH is minted exclusively by Coinbase. Read more about cbETH in the cbETH Whitepaper.
On Coinbase Wallet, cbETH is acquired through a trade, also known as a “swap.” We find you the best price through our integration with 0x, a DEX aggregator, and optimize for low gas fees. cbETH’s current APY is viewable in-product.
The main reason to stake is to passively earn on your ETH - you’ll earn staking rewards just by holding cbETH. With liquid staking comes more flexibility: you can swap cbETH for another token, send it to someone else, or use it in a DeFi protocol.
Coinbase Wallet does not charge a fee on staking transactions. You will have to pay a gas fee, which is a fee paid to the miner for processing crypto transactions and securing the respective network. Note this is different from staking on Coinbase.com. Coinbase takes a commission on rewards received for holding cbETH–whether staking through Wallet or Coinbase.com.
cbETH is supported on multiple leading DeFi protocols. You can potentially earn extra yield by depositing your cbETH into lending pools like Euler, Compound, Aave, Silo or through yield aggregators like Yearn Finance, but we recommend you do your own research before participating. Learn more about how to use your cbETH in DeFi here.
You can unstake by swapping back to ETH. You’ll get ETH plus any ETH staking rewards you earned while staking. Unstake by navigating to your cbETH balance or the DeFi tab in Coinbase Wallet.
Projected earnings are an estimate for how much you’ll earn over the next year. The value is calculated by multiplying the amount of cbETH by the current APY. The estimate does not account for fluctuations in the price of ETH or cbETH. APYs are determined by the network and can change over time.
The longer you hold cbETH, the more you can earn. While you can unstake at any time, most people stake at least long enough to earn back any network fees they paid to stake their ETH originally.
We recommend consulting a tax advisor as tax implications vary by jurisdiction.
Slashing risk
Ethereum’s consensus mechanism has several rules intended to protect the integrity of the network. If any of these rules are broken (voluntarily or not), a portion of the staked ETH is removed. Some examples include validator downtime and double-signing. We take a number of measures to mitigate these risks, including but not limited to: client diversification, node operator diversification, and geographical / hosting diversification (more detail under Coinbase Advantages below). These mitigants aren’t a panacea though. In the event of a validator or protocol failure, this network “slashing” could reduce the amount of staked ETH held by Coinbase on behalf of cbETH holders. In this event, the cbETH<>staked-ETH conversion rate would decrease–just as it increases when the network distributes rewards for successfully proposing and validating blocks.
Smart contract security risk
cbETH is at its core a smart contract, and with that comes risk that the code may be exploited in unforeseen ways. This risk is partially mitigated by the fact that the foundation of cbETH is based on heavily audited and battle tested smart contracts (like USDC). Additionally Coinbase obtained a smart contract audit from OpenZeppelin specifically for cbETH.
Custodial risk
There is always a non-zero custodial risk in crypto. In this case, Coinbase custodies keys associated with the staked ETH underlying cbETH. To the extent these keys are ever compromised, this would likely lead to the underlying ETH they control being lost.
cbETH price risk
The price of cbETH will be determined by the market and is not pegged or in any other way maintained by Coinbase. As with any asset trading in free markets, there is always some degree of price risk inherent in the trading of cbETH. As an example, because withdrawals from the Beacon Chain are initially unavailable (until the Shanghai upgrade allows for staking withdrawals), market participants are limited in their ability to arbitrage the price of cbETH to fair value. This may lead to cbETH trading at a price inconsistent with the amount of staked ETH and rewards that a user could redeem by unwrapping cbETH.
Coinbase has been operating a best-in-class staking operation since 2019 and began staking ETH on behalf of users in 2021. A number of measures are taken to ensure both the security of the ETH staking operation as well as the robustness of the Ethereum network broadly.
Client Diversification
Coinbase’s provisioned validators run multiple Ethereum clients, reducing the risk of a network-crippling bug that could result in a heavily correlated slashing event.
Node Operator Diversification
When running validators, Coinbase enlists a number of different node operators. This helps to reduce risk specific to any one operator.
Geographical & Hosting Diversification
Our node operators collectively run validators in multiple hosting environments (e.g., bare metal, AWS, GCP, etc.) and in multiple regions to maximize the resilience of their infrastructure. Again, this reduces the risk of correlated slashing.
Custody
Coinbase will custody the keys controlling the wallet addresses holding the staked ETH wrapped for cbETH. Coinbase’s best-in-class rigor has been keeping user funds safe for 10+ years.
Protocol Specialists
Coinbase has a team of Protocol Specialists contributing to the Ethereum ecosystem and staying on top of the latest developments.
To stake ETH using CB Wallet:
Open your CB Wallet and navigate to the Ethereum asset detail page or the DeFi tab. Locate the “Stake ETH” button under the Earn Interest Header.
Click “Earn.”
3. Enter the amount of ETH you would like to stake in ETH or USD and click Preview.
4. Review the transaction details, including network fees, and click “Stake.”
5. You will see a confirmation screen. You can view the transaction details on Etherscan if you’d like by clicking “View Transaction.”
6. It may take a few minutes for the transaction to process, which you can track by clicking “View Transaction.” Once it is complete, you will see your staked balance on the DeFi tab.
You can unstake cbETH and get your ETH back (plus any ETH staking rewards you earned while staking), by visiting the ETH asset page or DeFi tab in Coinbase Wallet. The unstaking is done via a swap. You can also swap back to another token at any time.
Staking ETH requires a network fee, also known as a ‘gas fee.’ If you do not have enough in your wallet, you will need to add more ETH to cover the fee. Click “Top up your ETH” to add more to cover your transaction.
Transactions on Ethereum require a gas fee, paid in Ethereum, to process the transaction. When you click 25%, 50%, or MAX, we deduct an estimated gas fee so your transaction will be successful.
