Are you seeking for a low-effort way to receive dividends on your assets? Here’s how you may put your cryptocurrency assets to work and earn rewards passively!
Whether you’re new to the crypto asset class or have been around for a while, chances are you’ve heard of staking—particularly in recent talks about Ethereum and a few other digital currencies. So, what does it mean to stake a cryptocurrency, and why is it necessary?
A Primer on Cryptocurrency Transactions and Staking
When Bitcoin, the world’s first cryptocurrency, was introduced in 2009, it pioneered the concept of decentralized currency. Simply put, Bitcoin is not subject to the central bank, government, or other authority oversight. Rather than that, it relies on a worldwide peer-to-peer network of participants to agree on the authenticity of new transactions.
Bitcoin’s transaction validation method, referred to as Proof of Work or mining, is widely considered the gold standard in terms of security and decentralization. However, the network is not infinitely scalable. This is because Bitcoin validates transactions by utilizing the processor cycles of a computer. Adding additional computers to a network does not improve its performance; it only improves its security.
We now have hundreds, if not thousands, of decentralized cryptocurrencies, each with its own set of benefits and specializations, more than a decade later. Ethereum is one such digital currency that is largely focused on the development of smart contracts and applications built on the Ethereum network.
Since its creation in 2014, Ethereum has followed a transaction validation and security model similar to that of Bitcoin. However, as the network’s usage increased dramatically, transactions became increasingly costly and delayed.
To address this issue, Ethereum developers proposed a variety of significant changes to the network, including abandoning Proof of Work.
Proof of Stake, the alternative, is projected to increase transaction throughput, efficiency, and overall network congestion. The Ethereum upgrade is scheduled to begin in 2021, with the network transitioning to the Casper Proof of Stake algorithm.
Now that you’re aware of the fundamentals of staking, it’s time to learn how you may get involved in the process. There are a variety of reasons to stake your favorite cryptocurrencies—with dividends and coin rewards frequently being the most compelling.
Staking on a Raspberry Pi: The Good News
Since Bitcoin introduced the notion of mining, it has been feasible to profit from the cryptocurrency market.
However, mining is suboptimal for the vast majority of bitcoin users due to high upfront costs and resource needs. Large-scale bitcoin mining technology can be prohibitively expensive to acquire, run, maintain, and even properly dispose of.
Ethereum, the second-largest cryptocurrency, is on track to use the Proof of Stake consensus method in the near future. This implies that as long as you have a particular quantity of Ethereum in your wallet, you can participate in the validation process in exchange for incentives.
Is it conceivable therefore to stake Ethereum and other digital currencies on hardware as little as a Raspberry Pi?
Yes, but with one critical caveat: Memory.
To stake cryptocurrency on a Raspberry Pi, you’ll need the latest model in the highest memory configuration. Due to the high RAM needs of the validation software, the Raspberry Pi 4 8GB is the only device that can comfortably run the Ethereum Proof of Stake process.
Another piece of hardware that is not optional is an external 1TB Solid State Drive (SSD). The Ethereum blockchain currently occupies roughly 200GB and is growing at a rate of approximately 1GB each day. A terabyte of storage space should last several years.
Apart from these two points, staking cryptocurrency does not require a lot of power or resources. Additionally, the Pi is quite capable of performing general computing tasks on its own these days.
Therefore, if you own a significant amount of Ethereum, earning passive income is conceivable for the minimal cost of a Raspberry Pi and an external hard drive. On the other side, staking requires a minimum of 32 ETH. At the time of writing, 32 ETH costs a whopping $40,000, so it’s not exactly a low entry point.
The only other stumbling block you may encounter is maintaining an online staking node at all times. This is because each minute that your hardware is unavailable, it is unable to process new transactions on the cryptocurrency network. An uninterruptible power supply (UPS) may be necessary to keep your Pi and internet connection operational during an unplanned power loss.
Ethereum Staking on a Raspberry Pi
There are two ways to get started with Ethereum staking on a Raspberry Pi. The first is an automated script that will automatically download and install the necessary software, whereas the second entails manually configuring everything.
If you are unfamiliar with the Raspberry Pi or the Linux operating system, you will enjoy the former’s simplicity.
Once your Raspberry Pi is configured and operational, simply visit Prysm’s documentation website for the most up-to-date instructions. Make certain to follow the commands on the ARM64 tab, as this is the hardware architecture upon which your Pi is based.
Following that, you must decide whether to operate your staking node on the Ethereum testnet or mainnet. As its name suggests, the Ethereum testnet is meant for experimenting with new modifications and, accordingly, does not include money or real ETH tokens.
Ethereum’s testnet, called Pyrmont, is great for checking out your hardware and configuration if you’re not totally confident about staking 32 ETH just yet. Since coins on the Ethereum testnet have no real-world value, the cost of entrance is zero. Furthermore, any blunders will not result in you losing real money.
If you’ve concluded that the Ethereum testnet is the appropriate choice for you, this post describes how to configure the aforementioned Prysm client. After you’re done practicing, simply start anew with this guide for the mainnet instead.
At the conclusion of either course, your Pi should be fully functional as an Ethereum validator node. You can now just unplug all non-essential peripherals and leave the device running.
Beyond Ethereum: Is It Possible to Stake Other Cryptocurrencies?
While staking on the Ethereum network is still in its infancy, a number of other cryptocurrencies have used Proof of Stake algorithms for several years. Additionally, major tokens such as NAV currency, VeChain, and NEO can be staked for prizes.
Given Ethereum’s high 32 ETH minimum investment requirement, you may first find these smaller coins easier to get started with. Smaller tokens with less network activity than Ethereum may even demand fewer resources, allowing for simultaneous staking of multiple currencies.
Staking allows you to maximize the return on your cryptocurrency investment while simultaneously contributing to the network’s security. Are you looking for additional methods to get involved in the cryptocurrency ecosystem? Consider setting up a full node for Bitcoin on your Raspberry Pi.