No - this is not 'free money'

BASE LAYER // Issue #9
Clarity for long-term crypto holders.

GM everyone.

Let’s talk about something that sounds boring—but might quietly wreck more portfolios this cycle than any meme coin ever could.

Staking.

More specifically: ETH staking.

On paper, it sounds like magic:

• Lock your ETH

• Earn 4–6% annually

• Do nothing

• Get rewarded

It's sold as passive income.
Free yield.
“Set it and forget it.”

But that framing is dangerous. Because it leaves out the part that matters most:

Staking isn’t free. It’s a trade.
And every trade has a cost.

So here’s what staking actually is.

When you stake ETH (or use a liquid staking derivative like stETH), you’re not just earning passive income.

You’re:

• Giving up liquidity

• Taking on custodial or smart contract risk

• Locking yourself into a specific economic role in the ecosystem

• Exposing yourself to technical risks (like slashing, validator failure, depeg events, and protocol-level bugs)

In short: you’re accepting risk in exchange for yield.

The same people who panic when their alt drops 10% are staking 5- and 6-figure ETH positions without understanding what actually happens under the hood.

That’s not passive. That’s negligence dressed up as strategy.

But isn’t 5% ETH yield a no-brainer?

Let’s break it down.

Say you stake 10 ETH and earn 5%. You make 0.5 ETH in a year.
Sounds great.

But what if ETH drops 40% in fiat value during that time?

You still earned 0.5 ETH, yes—but in dollar terms, your position might be worth less than when you started.

That doesn’t make staking “bad.”
It just means staking yield is denominated in ETH—not dollars. And if your brain is still wired in fiat, you’ll miss the nuance.

So if you’re going to stake, you need to answer these questions first:

1. What’s your time horizon?
   If you need liquidity in the next 6–12 months, staking might restrict your flexibility more than you realize.

2. What’s your custody plan?
   Are you running your own validator? Using a centralized platform? A protocol like Lido or Rocket Pool? Each has a different trust model—and a different risk stack.

3. How much of your ETH are you staking?
   Some people stake everything. I don’t. Why? Optionality.
   When the next killer opportunity appears, I want to be liquid enough to pounce.

4. What happens if this goes sideways?
   If there’s a bug, a slashing event, or a depeg—do you understand the recovery mechanics? Or are you relying on hope and vibes?

So... is staking bad?

Not at all.

In fact, staking can be an excellent part of a structured portfolio—if it’s approached with the same clarity as your buys and exits.

What I’m pushing back against isn’t staking.
It’s the framing of staking as “riskless passive income.”

Because when something looks like free money in crypto, it almost never is.

If you want a simple rule: don’t stake what you’ll need in the next 12 months.

Write your liquidity plan.
Match it to your time horizon.
And never stake just because everyone else is.

– Alex
Founder, Base Layer