TL;DR
BETH is a tokenized version of staked ETH on Binance. It’s a simple way to participate in staking on the ETH 2.0 Beacon Chain. By holding it, you’re entitled to staking rewards earned by Binance’s ETH 2.0 staking node. But that’s not all; you can also use it in several other ways on the Binance platform and BNB Smart Chain (BSC).
Introduction
With the Beacon Chain launch in December 2020, the set of upgrades (ETH 2.0) that aims to improve Ethereum scalability is on track. As a part of phase 0 of the deployment plan, ETH can already be staked on this new chain. BETH allows you to easily participate on ETH staking without losing the flexibility to withdraw your ETH anytime.
What is BETH?
BETH is a tokenized version of staked ETH. Each BETH represents 1 staked ETH on Binance. But hang on, isn’t Ethereum running on Proof of Work (PoW)? It is, for now. However, as a part of ETH 2.0, Ethereum will fully switch to Proof of Stake (PoS).
Due to the complexity of the upgrades, this is rolled out in several phases. The first step was to launch what’s called the Beacon Chain, which will be core to Eth2 once sharding is fully implemented. The Beacon Chain is already running, and as of March 2021, it has more than 3.5 million ETH securing it.
The deposit contract for the Beacon Chain works only one-way. This means that users can deposit, but they won’t be able to withdraw until ETH 2.0 is fully launched – which may take years. In addition, they’re only able to deposit in increments of 32 ETH.
All that ETH in the Beacon Chain is already receiving staking rewards. So, what do you do if you don’t have 32 ETH, or you want to maintain the flexibility to withdraw? You can join one of the many ETH 2.0 staking pools. One of these is provided by Binance.
You can convert your ETH to BETH at a 1:1 ratio and start receiving staking rewards in BETH. Great, but what if you still want to use your ETH elsewhere? Binance also has a BETH/ETH spot market, where you can convert your BETH back to ETH again.
How to use BETH
You can use BETH in several ways. One of them is simply to keep it on Binance and enjoy the staking rewards. You can also withdraw your BETH to BNB Smart Chain (BSC) and use it in DeFi apps. Let’s take a look at the different options.
BETH in Binance Launchpool and Liquid Swap
If you’re keeping your BETH on Binance, you can use it to earn additional rewards. For example, Launchpool projects sometimes use BETH as one of the coins available for deposit. You simply lock your BETH into Launchpool and earn a newly launched token that will get immediate liquidity from Binance’s spot exchange.
BETH in Binance Liquid Swap
You can also use BETH on Binance Liquid Swap. For instance, you can earn rewards by providing liquidity to the ETH/BETH liquidity pool. Note that you can add ETH, BETH, or both into the liquidity pool - but if you add both, you won’t pay fees.
BETH in borrow-lending protocols
Another option is to deposit BETH into a money market like Venus and earn a yield or use it as collateral to borrow other coins.
BETH on PancakeSwap
You can also provide liquidity to the BETH/ETH pair on PancakeSwap and receive CAKE. Note that since PancakeSwap works similarly to Uniswap, you’ll also need the tokenized version of ETH on BSC to provide an equivalent value of the two tokens.
An advantage of providing liquidity to this pool is that since BETH and ETH have equal or very similar prices, you’re less exposed to impermanent loss than in other pools. If you don’t know what that means, read our impermanent loss article.
In short, this pool is less exposed to impermanent loss because the relative volatility between BETH and ETH is much lower than for something like ETH and BUSD. In other words, the price of ETH and BETH should generally remain in a small price range, so the effects of impermanent loss are mild.
BETH in yield aggregators
Lastly, you can also use BETH in one of the yield aggregators on BSC. You deposit your BETH, and the protocol automatically tries to find the best yield opportunities for you. Beefy and Autofarm are two examples that support BETH.
Is BETH worth more than ETH?
If you go to the BETH/ETH market on Binance, you’ll see that BETH doesn’t trade at a 1:1 ratio with ETH – even though each BETH represents 1 staked ETH. Why is that? Well, the short answer is, they aren’t the same asset. Price discovery between BETH and ETH is completely up to the market. Remember, BETH is a tokenized version of staked ETH.
As such, BETH has different implications than ETH. The fact that it’s trading at a different price means that the market is pricing those qualities differently than ETH. BETH currently can’t be redeemed for ETH, which means there’s less flexibility to it than ETH. At the same time, it entitles the holder to staking rewards.
Closing thoughts
BETH is a tokenized version of staked ETH on Binance. You can earn ETH 2.0 staking rewards without having to worry about the technical requirements of setting up and maintaining an ETH 2.0 staking node. Apart from that, there are several ways to earn an additional yield using DeFi apps on the BNB Smart Chain.