Ethereum Merge, Staking and Trading FAQ – Kraken

On-chain staking

An overview of eligibility criteria (including geographic restrictions) for On-chain staking can be found here.

Ethereum 2.0 or Eth2, is an upgrade to the Ethereum network. The Ethereum Merge is migrating Ethereum from the current Proof-of-Work network to a new Proof-of-Stake blockchain, Eth2 aims to increase scalability and reduce energy consumption.

As a Proof-of-Stake blockchain, the Eth2 Beacon Chain is built and secured by the network's validators. To participate as a Beacon Chain validator, you must stake ETH by sending it to a deposit contract on the Ethereum network. When you stake through Kraken, we will credit your account with staked ETH and the applicable staking rewards consistent with our Terms and the rules of the Ethereum network.

Review frequently asked questions within the sections below:

General

Where can I see updates that Kraken is making as a result of The Merge?

Our notice regarding The Ethereum Merge will be updated as more information becomes available.

What are the different stages of The Merge?

Review the image below for more information.

What service disruptions are expected during The Merge? (Trading, funding, etc)

We estimate funding (deposits and withdrawals) may be unavailable for 12 hours or longer during The Merge. This estimate could decrease/increase depending on network conditions. Visit status.kraken.com for real time updates.

ETH markets will remain active and available for trading throughout The Merge.

Do I need to do anything to have my ETH transitioned to the Proof Of Stake Chain?

No, this happens automatically to your ETH custodied at Kraken. There will be no need to convert your existing ETH into anything else before, during or after The Merge. The newly merged asset will maintain the ETH name.

As no action is needed, it is important to always be careful of potential scams, especially during The Merge, that ask for you to withdraw or transfer funds to upgrade your ETH. If you need to report an incident or you have fallen victim to this type of scam, reach out to our Live Chat support or submit a request.

What happens to my staked ETH post-merge? Will this automatically be credited to my account or is there any technical work that needs to be conducted first?

Staked ETH (ETH2.S) will remain staked and not available for unstaking until the Shanghai upgrade at a later date. This limitation is not specific to Kraken - it is a limitation on the Ethereum network itself. Once withdrawals are enabled after the Shanghai upgrade, you will need to manually unstake your ETH to trade it or withdraw it from the exchange.

What will happen in the event of an airdrop or a fork and what impact would these events have on margin positions?

Please review our blog for more information.

Staking

Can I un-stake ETH?

Staked ETH cannot be unstaked or transferred on the Ethereum network until after the Shanghai upgrade. This means that clients should only stake ETH that they plan to hold long-term. This limitation is not specific to Kraken - it is a limitation on the Ethereum network itself.

What are the current rewards for staking ETH, what about after The Merge?

Reward rates for your staked ETH are currently estimated between 4% and 7% annually (RPY), and these rewards are locked in your account as ETH2. These rewards will continue after The Merge.

After The Merge, Kraken will also collect additional rewards payable to stakers. This includes tips paid to Kraken’s validators as a result of fee activity on the Ethereum network and for MEV activity. Kraken uses market leading software to maximize the rewards payable to stakers and shares this with our clients in the same way as inflationary staking rewards. The additional rewards will be issued to your account (estimated to begin on September 25th 2022 after 01:45 UTC) as unstaked ETH, fully unlocked and able to stake, trade or withdraw in your account.

Kraken will continue to distribute weekly rewards on a variable rate that reflects what we’ve earned On-chain minus our fee. Rewards will vary according to the rules of the Ethereum protocol.

What is the Fee for Staking?

Kraken retains an administrative fee of 15% on all rewards received and the estimated RPY reflects this fee.

Where can I see my ETH 2.0 staking rewards?

These rewards are visible in the Earn page underneath the Total rewards column.

Why are my staking rewards locked? When will they unlock?

Unlike regular Proof-of-Stake protocols, staked ETH and ETH staking rewards will be locked until the Shanghai upgrade is complete. This limitation is not specific to Kraken - it is a limitation on the Ethereum network itself. In the event the Eth2 network upgrade is delayed or cannot be completed, you may be unable to access, withdraw or transfer your staked ETH and locked rewards On-chain indefinitely.

Kraken will continue to distribute weekly rewards on a variable rate that reflects what we’ve earned On-chain minus our fee. Rewards will vary according to the rules of the Ethereum protocol.

Do I need to be holding ETH in order to stake?

Yes, in order to stake ETH you first need to deposit or buy ETH.

How do I stake ETH?

You can stake ETH following this guide. Newly staked ETH will undergo a bonding period of up to 20 days (often less than a couple of hours, depending on network conditions) before it will start earning ETH2 rewards.

Can I deposit or withdraw staked ETH?

No, staked ETH (ETH2.S) will remain staked and not available for unstaking until the Shanghai upgrade at a later date. This limitation is not specific to Kraken - it is a limitation on the Ethereum network itself.

How long do I have to wait after staking to begin earning rewards?

The Ethereum 2.0 network imposes an activation period on new validator nodes, which may cause a delay in distributing ETH staking rewards. To ensure staking rewards are distributed fairly, newly staked ETH will undergo up to a 20 day bonding period before it will start earning ETH2 rewards. After the bonding period has elapsed, staking rewards will begin to accrue.

Do staked ETH rewards compound using the Grow Rewards option?

No. Unlike other assets which can be staked on Kraken, ETH2 rewards do not compound so you will not see the Grow Rewards feature available.

Trading

Can I trade staked ETH?

As a courtesy to clients who may wish to exchange their staked ETH for unstaked ETH, Kraken provides a trading pair ETH2.S/ETH for this purpose, with two important caveats:

The market is NOT available for residents of the US and Canada (Canadian clients can stake ETH but not trade their staked ETH for unstaked ETH). Staking is not available for residents of the United States.
We offer no guarantees of any kind about the continued availability or liquidity of this market - price slippage in market orders should be expected and it may be difficult to exchange staked ETH for unstaked ETH in large amounts. This market may not be available for the duration of the Ethereum 2.0 transition.

Can I use staked ETH or ETH staking rewards as collateral for margin trading?

No. Unlike regular ETH, staked ETH and ETH staking rewards can not be used as collateral assets for margin trading.

Is the ETH2.S/ETH market available in Canada and the US?

The market is NOT available for users located in or residents or citizens of the US and Canada. Canadian clients can stake ETH, but not trade their staked ETH for unstaked ETH. Staking is not available for residents of the United States.

Will the ETH2.S/ETH market be stable and available until the end of the Ethereum 2.0 transition?

We offer no guarantees of any kind about the continued availability or liquidity of this market - price slippage in market orders should be expected and it may be difficult to exchange staked ETH for unstaked ETH in large amounts and this market may not be available for the duration of the Ethereum 2.0 transition.

What is the meaning of the ETH, ETH2.S and ETH2 ticker symbols on Kraken?

ETH	The ETH ticker on Kraken represents “regular” ETH: ETH on the Ethereum blockchain that has neither been staked nor earned as staking rewards. It can be staked, deposited, traded and withdrawn.
ETH2.S	The ETH2.S ticker on Kraken represents ETH that has been staked to support the Eth2 network upgrade. Clients that are not located in or citizens or residents of the US or Canada may transact on Kraken’s ETH2.S/ETH. Otherwise, ETH2.S cannot be un-staked, deposited or withdrawn.
ETH2	The ETH2 ticker on Kraken represents ETH that is earned as staking rewards through Eth2 staking. ETH2 cannot be staked, deposited, traded or withdrawn.

Does staking ETH impact margin trading?

Staking ETH will impact your equity for margin trading, because ETH is a collateral currency and will be removed from your trading and equity balances while staked.

What happens to my long and short ETH positions during The Merge?

Review our blog for more information on Kraken's treatment of margin positions during The Merge.

Futures Trading

Will the ETH index for both fixed and perpetual futures continue as the PoS chain?

Yes. As the Proof of Stake upgrade has the majority support of the Ethereum community, the ETH index will continue as the Proof of Stake chain after The Merge.

Will fixed maturity futures be settled to the PoS chain, PoW chain or a combination of both?

Fixed maturity contracts will be settled to the Proof of Stake chain. Any new Proof of Work asset arising from a fork after The Merge will be treated as an entirely separate asset.

Will fixed maturity futures be settled on The Merge date or at the usual settlement date?

Fixed maturity contracts will be settled on their usual settlement date.

How will you handle the ETH perpetual futures contracts? Will you settle it and start a new ETHPoS contract?

Due to the Proof of Stake upgrade having majority support of the Ethereum community, both ETH perpetual contracts will continue to trade as the upgraded Proof of Stake chain.

Will there be any changes to margin requirements for the currently-listed ETH contracts?

Kraken Futures reserve the right to update the margin schedule at any time without warning. However, we will endeavor to give as much notice as possible via platform notifications. Note that if there is not sufficient margin in a trader’s wallet to meet updated requirements, position(s) can be liquidated.

If the ETH PoW airdrop is supported on spot, will this include my Futures balances?

If the ETH PoW airdrop is supported on spot, your ETH balance in your Futures account at time of the snapshot will be included. Your spot account would be credited based on the combined balance of your spot and futures accounts at the time of the snapshot. Unrealised PnL on single-collateral inverse futures positions will be included in the snapshot.

Note: unrealised PnL on multi-collateral positions with ETH as the PnL preference will be not be included

For futures balances, only Kraken Single Sign-On (SSO) accounts, or sub-accounts linked to a Kraken SSO accounts will be eligible in the event of an ETH PoW airdrop. Any legacy non-SSO futures account that is not linked to a Kraken SSO account will not be eligible.

If you have any additional questions, our support specialists are available to assist you.