Ethereum Merge, Staking and Trading FAQ for residents of Japan – Kraken

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

Staking

Trading

General

Where can I see updates that Kraken is making as a result of the merge?

We will update our response to the Ethereum "The Merge" on our blog, SNS, etc.

What are the different stages of The Merge?

Review the image below for more information.

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, 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 customers in the same way as inflationary staking rewards. These new rewards will be issued to your account as unstaked ETH, fully unlocked and able to stake, trade or withdraw in your account.

Kraken will continue to distribute 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.

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.

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?

No, Japanese residents cannot trade staking ETH (ETH2.S).

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.

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

General

Staking

Trading

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