Ethereum's Proof of Stake system pays validators (stakers) new ETH to process transactions. You stake ETH → earn ~4.2% APY paid in ETH → withdraw anytime. It's like a savings account but in ETH. The more ETH staked network-wide, the lower the yield (supply/demand of validators).
Lido Finance is the simplest way: deposit any amount of ETH (even ₹100) → receive stETH (liquid staking token representing your ETH + rewards). stETH earns 4.2% daily, rebaseing each morning. Use stETH in DeFi while still earning staking yield. Over $35B staked on Lido — the largest DeFi protocol.
Advanced users stack yields: Stake ETH → get stETH (4.2% APY) → use stETH as collateral on Aave → borrow USDC → supply USDC to Aave (7.8% APY). Net yield: 4.2% + portion of 7.8% = 8-12% combined. Higher reward = higher complexity and liquidation risk. Start with just the 4.2% staking first.
ETH staking rewards in India: taxed at your income slab rate (not the 30% gains rate) because it's "income from other sources." When you sell stETH for profit, that gain is taxed at 30%. Track staking rewards separately in Koinly — they have a different tax treatment than your ETH purchase gains. Always use Koinly.
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