Staking pools allow users to participate in the validating process of Ethereum and earn rewards without having to deal with the technical complexity of running nodes and the capital requirements (32 ETH per node).

The deposits and rewards are locked on the Ethereum 2.0 chain until “The Merge” (early 2022 according to roadmap) which will merge the two Blockchains together and finalize Ethereum’s transition to Proof-of-Stake. However, you can sell your deposit token earlier - albeit at a small discount.

The rewards paid for staking are determined algorithmically by the Ethereum network. The more people stake the lower the rewards. For example, at 1m ETH staked the annual interest rate is 15.7%, at 2m ETH it's 11% and at 3m it’s 9%. You can track the amount of ETH staked on DuneAnalytics.

Centralized staking pools take control of your Ether and stake it for you. Decentralized staking pools give you more control over your funds and also give you a deposit token (e.g $sETH2) that you can use in the DeFi ecosystem to take a loan for instance or do other yield generating activities. For these reasons it’s financially more advantageous to stake with a DeFi staking pool.