ETH vs Solana vs Cosmos Staking: A Comparative Guide
Ethereum, Solana, and Cosmos have established themselves as the leading blockchains.
Outside of Bitcoin, the three blockchains support impressive token market capitalization, developer activity, and network performance. These digital assets are prime targets for long-term crypto participants.
Long-term crypto investors hold the blockchains’ respective assets and seek to capitalize on passive income opportunities through the staking process. This article will explore the staking mechanisms of ETH, SOL, and Cosmos, comparing their rewards, risks, and overall profitability to help you decide which blockchain best suits your investment portfolio.
Ethereum switched to a Proof-of-Stake (PoS) consensus mechanism with the launch of the Beacon Chain last December 2020 and the completion of The Merge in September 2022. Ethereum's transition from Proof-of-Stake (PoS) to Proof-of-Work (PoW) reduced the network's energy consumption and enabled ETH holders to stake their tokens to secure the network and earn rewards.
Earlier Solostaker guides discussed how the early Ethereum network relied on high-energy mining hardware. This switch to Proof-of-Stake significantly reduced the Ethereum blockchain’s electricity requirements.
Solana, also called the “Ethereum Killer,” is known for its high speed and low transaction costs, making it a popular choice for decentralized applications (dApps) and decentralized finance (DeFi) projects. Solana takes its Ethereum Killer name due to its ability to outperform Ethereum.
In its early days, the Solana ecosystem suffered from network congestion and outages, which caused transactions to fail. However, the Solana ecosystem has vastly improved and has reliably processed transactions.
Solana uses a Delegated Proof-of-Stake (DPoS) consensus mechanism. Like Ethereum and other Proof-of-Stake (PoS) networks, Solana relies on validators. However, SOL token holders allocate their Solana tokens to these validators in the delegation process.
Cosmos, often called the "Internet of Blockchains," aims to create an ecosystem of interconnected blockchains that can communicate. Its native token, ATOM, can be staked to secure the network and facilitate interoperability between blockchains.
The Cosmos Hub is the first blockchain in the Cosmos Network. It connects other blockchains using the Inter-Blockchain Communication (IBC) protocol, allowing for data and token transfers.
The network uses a Delegated Proof-of-Stake (DPoS) consensus mechanism, where stakers delegate ATOM, the native token, to one of 180 validators who secure the network by confirming transactions and adding new blocks.
The validator count is capped, so validators compete to secure staked assets. The cap can be increased through the Cosmos Hub’s governance system.
Among the three major players, the Ethereum ecosystem is the only ecosystem that reasonably allows solo staking. This type of staking involves setting up a validator to validate transactions and contribute to network security.
For solo stakers, Ethereum staking requires a minimum of 32 ETH ($80,000 as of writing) and involves running a validator node. This method gives the staker complete control over their assets and staking rewards. However, it demands technical knowledge and constant monitoring to avoid penalties like slashing.
For Solana and Cosmos, the entry barriers must be lowered for everyday people to participate.
Solana blockchain staking requires 365 SOL tokens a year (1 SOL token per day) in voting fees. To break this would imply at least 5,000 SOL tokens ($750,000) at 7% staking rewards per year staked as a solo staker.
For Cosmos blockchain, to make the top 180 validators, you would need over $300,000.
Staking has evolved to the point where Pooled Staking can be performed directly from your crypto wallet, like MetaMask, or hardware wallet, like Ledger. This means that as long as you maintain good operational security practices, you can safely participate in the staking process.
For Solana and Cosmos, crypto wallets such as Phantom and Keplr are great free wallets to start your staking journey.
Cosmos differentiates itself by offering liquid staking through platforms like Stride. Users may stake from multiple Cosmos ecosystem networks such as Celestia and Injective and receive the Stride token in return.
This many-to-one setup is unlike Solana and Ethereum, which primarily support liquid staking one is to one.
According to the documents:
“In simple terms, the Alliance module enables multiple assets to be staked on a chain.”
Currently, stakers can use a handful of native and decentralized finance tokens to secure the Luna Network. The grand vision is that eventually, all Cosmos-based tokens, even liquid staking tokens, can be used to secure a Cosmos chain.
Restaking is still in its early stages but shows promise. Ecosystem participants laud its ability to leverage existing chain security and offer additional staking rewards.
Ethereum Network
Ethereum switched to a Proof-of-Stake (PoS) consensus mechanism with the launch of the Beacon Chain last December 2020 and the completion of The Merge in September 2022. Ethereum's transition from Proof-of-Stake (PoS) to Proof-of-Work (PoW) reduced the network's energy consumption and enabled ETH holders to stake their tokens to secure the network and earn rewards.
Earlier Solostaker guides discussed how the early Ethereum network relied on high-energy mining hardware. This switch to Proof-of-Stake significantly reduced the Ethereum blockchain’s electricity requirements.
Solana Network
Solana, also called the “Ethereum Killer,” is known for its high speed and low transaction costs, making it a popular choice for decentralized applications (dApps) and decentralized finance (DeFi) projects. Solana takes its Ethereum Killer name due to its ability to outperform Ethereum.
In its early days, the Solana ecosystem suffered from network congestion and outages, which caused transactions to fail. However, the Solana ecosystem has vastly improved and has reliably processed transactions.
Solana uses a Delegated Proof-of-Stake (DPoS) consensus mechanism. Like Ethereum and other Proof-of-Stake (PoS) networks, Solana relies on validators. However, SOL token holders allocate their Solana tokens to these validators in the delegation process.
Cosmos Network
Cosmos, often called the "Internet of Blockchains," aims to create an ecosystem of interconnected blockchains that can communicate. Its native token, ATOM, can be staked to secure the network and facilitate interoperability between blockchains.
The Cosmos Hub is the first blockchain in the Cosmos Network. It connects other blockchains using the Inter-Blockchain Communication (IBC) protocol, allowing for data and token transfers.
The network uses a Delegated Proof-of-Stake (DPoS) consensus mechanism, where stakers delegate ATOM, the native token, to one of 180 validators who secure the network by confirming transactions and adding new blocks.
The validator count is capped, so validators compete to secure staked assets. The cap can be increased through the Cosmos Hub’s governance system.
Staking Methods Comparison
Staking in the three blockchains involves various methods, each offering different levels of participation, rewards, and risks. In addition, the capital needed to participate, staking rewards rates, and unbonding periods differ across each blockchain network. Here’s a comparison of the primary staking methods across these three blockchain ecosystems.Solo Staking
Among the three major players, the Ethereum ecosystem is the only ecosystem that reasonably allows solo staking. This type of staking involves setting up a validator to validate transactions and contribute to network security.
For solo stakers, Ethereum staking requires a minimum of 32 ETH ($80,000 as of writing) and involves running a validator node. This method gives the staker complete control over their assets and staking rewards. However, it demands technical knowledge and constant monitoring to avoid penalties like slashing.
For Solana and Cosmos, the entry barriers must be lowered for everyday people to participate.
Solana blockchain staking requires 365 SOL tokens a year (1 SOL token per day) in voting fees. To break this would imply at least 5,000 SOL tokens ($750,000) at 7% staking rewards per year staked as a solo staker.
For Cosmos blockchain, to make the top 180 validators, you would need over $300,000.
Pooled Staking
Pooled staking allows stakers to combine their assets and participate in staking. No minimum stake is required, and users will remain in custody of their crypto assets.
Staking has evolved to the point where Pooled Staking can be performed directly from your crypto wallet, like MetaMask, or hardware wallet, like Ledger. This means that as long as you maintain good operational security practices, you can safely participate in the staking process.
For Solana and Cosmos, crypto wallets such as Phantom and Keplr are great free wallets to start your staking journey.
Centralized Exchange Staking
Many centralized exchanges like Coinbase and Kraken offer staking across several networks, not just Solana and Ethereum. Users can stake tokens directly on the exchange without worrying about technical details. The downside is lower rewards due to the exchange's commission rate. Centralized exchanges often have the highest commission rates in the staking industry. The custodial risk of trusting a centralized entity with your assets also exists.Liquid Staking
Liquid staking rose to prominence for the Ethereum network with platforms like Lido Finance. Users receive a liquid staking token (stETH) representing their staked ETH. You can utilize these liquid staking tokens (LSTs) in various DeFi protocols to maximize staking rewards and yield. However, this method has inherent risks, particularly those associated with smart contracts. Solana and Ethereum work similarly. In the Solana network, Jito Network users receive JitoSOL, an LST that can be employed in multiple DeFi projects.
Cosmos differentiates itself by offering liquid staking through platforms like Stride. Users may stake from multiple Cosmos ecosystem networks such as Celestia and Injective and receive the Stride token in return.
This many-to-one setup is unlike Solana and Ethereum, which primarily support liquid staking one is to one.
Restaking
Restaking is an emerging concept popularized by platforms like Eigenlayer. The platform allows Ethereum stakers to reuse their staked ETH to secure additional protocols or applications. Solana is also exploring restaking through platforms like Solayer. While Solana and Ethereum share the current spotlight in restaking, Cosmos has been pioneering this concept since early 2023. Alliance is an open-source Cosmos SDK module that leverages interchain staking.
According to the documents:
“In simple terms, the Alliance module enables multiple assets to be staked on a chain.”
Currently, stakers can use a handful of native and decentralized finance tokens to secure the Luna Network. The grand vision is that eventually, all Cosmos-based tokens, even liquid staking tokens, can be used to secure a Cosmos chain.
Restaking is still in its early stages but shows promise. Ecosystem participants laud its ability to leverage existing chain security and offer additional staking rewards.
Staking Optimization
All three networks support staking optimization processes, from liquid staking to restaking. These methods can significantly boost the yield on your crypto assets. Depending on the staking method, one can also choose commission-free staking pools that auto-compound staking rewards.Final thoughts on ETH vs Solana vs Cosmos staking
Staking is a powerful tool for generating passive income via staking rewards. From an investment perspective, choosing large blockchains such as Ethereum, Solana, and Cosmos increases your probability of success. They are well adopted by developers and will likely survive the various crypto cycles. By learning the ins and outs of staking within each blockchain, you can select the right blockchain and staking method that suits your needs. Sample Table:
Editor’s Note: This article was originally published in February 2024 but has been updated with new information
The content of solostakers.com is for informational purposes only and should not be considered financial advice. It represents the personal views and opinions of the author(s) and is not endorsed by any financial institution or regulatory body. Cryptocurrency and staking investments carry inherent risks and readers should conduct their own research and consult with a financial professional before making any investment decisions. The owner and author(s) of solostakers.com will not be liable for any losses, damages, or consequences arising from the use of the information on this site. By accessing solostakers.com, you agree to bear full responsibility for your investment decisions.
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