Ethereum 2.0 Staking, Real Opportunities And Investment Potential
The long-awaited Ethereum 2.0 upgrade, also known as serenity, is
almost upon us, and it’s perceived in the cryptospace to be a momentous shift
in comparison with those from the past half-decade. The upgrade will take
effect in three phases and span a couple of years. Although full-blown
scalability only becomes evident with the implementation of the last phase, the
foremost phase is also as important.
The first phase will mark the unveiling of Ethereum’s Proof-of-Stake
(POS) Beacon Chain, laying the path for the next phase introduction of
scalability via sharding, and the eventual merging of the ETH and ETH 2.0
network.
The Ethereum 2.0 upgrade is set to combat the network’s long-standing
scalability issues by transitioning from a Proof-of-work to a Proof-of-Stake
(POS). As you may already know, Proof-of-Stake in itself simply means staking a
certain value of cryptos to become a node validator and earn a stake.
The question now is, “how will staking play out in ETH 2.0?” Let’s
have a look.
Ethereum 2.0 –
The Journey so Far
At the start of November 2020, the ETH Foundation kickstarted the
initial process of the much-anticipated ETH 2.0 upgrade, which detailed the
requirements for the implementation of Phase 0 (or first phase). The phase 0
specifications stated that an approximate volume of 524,288 ETH must be staked
by a minimum of 16,384 validators to start-off the Proof-of-Stake consensus
protocol. Becoming an ETH validator and earning a stake requires a deposit of
32 ETH on the chain.
Since Phase 0 is slated to launch on the 1st of December
2020, the requirement demanded that the staking milestone be completed by the
24th of November 2020. The staking requirements for Phase 0 of the
upgrade were completed on the set date with over 694, 368 ETH worth USD 422
million, deposited in about 16,736 transactions of 32 ETH each. The Ethereum
2.0 upgrade will go live in three days with the Beacon chain, which is the
first phase of the process. Consequently, other phases will follow in the
coming years.
How Will
Staking Play Out in Ethereum 2.0?
In principle, staking in Ethereum 2.0 will be open to all and sundry
after the implementation of Phase 0. However, in the real sense of things, certain
basic requirements must be met by potential stakers.
-
First – The Minimum Financial
Stake
This is a sacrosanct requirement that qualifies anyone as a staker/validator
on the ETH 2.0 network. A minimum of 32 ETH is set as the staking threshold. At
the time of writing, the market price per ETH is $537, that
would mean a minimum stake of about $17,200. Stakers will have the privilege to
validate transaction blocks, get rewards in return, and also improve the
overall security of the network. Additionally, a certain percentage of the fees
paid on transactions will also go to stakers.
-
Second – Becoming a Node
Operator
Apart from the minimum financial commitment, a staker must be
willing to become a node operator. To operate a node, you must have a computer
that checks all the specified hardware requirements to effectively run the
Beacon node software and stays online continuously. However, there might just
be an alternative means to run a node, which we’ll look at shortly.
It is imperative to note that transaction block validators are
chosen at random by an algorithm that leverages on the online presence of
validating nodes per time. According to an estimate from ConsenSys,
if 100,000 validators are online, each one will only validate one transaction
block per 2 weeks.
Staking and
Running A Node in ETH 2.0 – The Alternative
Although ETH 2.0 is yet to go live, as soon as it does, certain
staking alternatives dubbed “Staking Pools” could quickly begin to make headways.
These staking pools may provide you with the opportunity to become a staker
without necessarily having a high-end computer or depositing the minimum
financial stake of 32 ETH.
Staking pools will provide the necessary computer hardware that’s
sufficient to run a node at a fee, provided that users are willing to meet the
minimum financial requirement. Also, users may choose to pool their Ethereum
until they attain the required threshold to activate a node. In this case,
staking rewards are shared proportionately.
Final Thoughts
The hotly-anticipated ETH 2.0 upgrade is one of the most debated
topics among crypto enthusiasts today and the transition from POS from POW is
just the start of what’s to come. This significant change in consensus protocol
is targeted at achieving future scalability. Furthermore, with massive
interests and anticipations surrounding the unveiling of this upgrade, its
final implementation could spell a revolutionary market stride for the world’s
second-largest digital asset.
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