How much money can you earn by participating in Eth2.0 Staking?
Editor's Note: This article comes fromUnitimes（ID：Uni-times）, by Jhonny, published with permission.
Editor's Note: This article comes from
, by Jhonny, published with permission.
What financial returns can investors expect to receive? This was perhaps the most anticipated question at today’s “Ethereum 2.0 Staking Panel” — at least from a retail investor’s perspective. However, the answer is far from simple.
At the recently held Ethereal Virtual Summit 2020 conference, a Panel discussion group session with the theme of "Ethereum 2.0 Staking" was carried out, and the most anticipated question was "What economic returns are expected to be obtained by the stakers?", at least This is true from a retail investor's point of view. But, according to Collin Myers of ethereum development studio ConsenSys, the answer to that question is not that simple.
Eth2.0 is a large-scale Ethereum network upgrade that will bring many improvements to the current Ethereum blockchain. This upgrade will start from "Phase 0". Phase 0 (the Beacon Chain Phase) will pave the way for Ethereum to transition to a Proof of Stake (PoS) consensus algorithm, moving away from the current computationally intensive Proof of Work (PoW) algorithm.
The main difference brought about by the Eth2.0 upgrade is that in the PoS system, users will be able to "lock" (stake) their ETH assets, which will be used to validate new blocks, thereby helping to power the network. Of course, stakers are rewarded for their contributions, and the greater their stake in the ecosystem, the greater the reward.
According to Myers, there are quite a few important milestones that the Eth 2.0 network must achieve before ETH holders can begin to consider the potential profits from staking. The first and most important milestone is that the "genesis block" of Eth2.0 will only be born when the total amount of staked ETH exceeds 524,000 ETH, which is approximately 16,000 validators (each validator stakes 32 ETH). .
Mayers added: "Until then, no one will reward."
He also pointed out that "Phase 0" is not a fixed time period, although according to some projections, developers expect Phase 0 to last 12 to 18 months, or even 24 months.
Mayers added that the next major milestone is 5 million ETH staked, by which time “Phase 1” may have already begun.
So, how much profit can early stakers expect to make?
Myers said: "From a network perspective, at the genesis block (annual rate of return) is 20.3%, when the number of pledges reaches 5 million ETH, this number will drop to 6.6%, and this does not Including the cost of facilities. People can choose from a variety of different ways to participate, and we are mainly focusing on 'at home' individual participation methods."
Mayers continued: "When the number of pledges reaches 5 million ETH, the proportion of maintenance costs will rise to 14.7%. In other words, from the genesis block until the period when 5 million ETH is pledged, your actual net rate of return It will be between 17% and 3.7%."
Myers also warns all potential investors that the Eth2.0 network is designed to be "highly open," which means that the rate of return for participating in staking is variable. While the rewards themselves should not be considered volatile, they can still change because "anyone can enter and exit the system".
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Ethereum is expected to launch the Staking mechanism in the third quarter of 2020
According to Ben Edgington, the developer of the Eth2.0 client Teku, who attended the Ethereal Virtual Summit recently, the Staking mechanism of the Eth2.0 network upgrade may go live as early as July 2020. Ben says:
“The Beacon Chain is the start of the road to (Eth2.0), a self-sustaining proof-of-stake chain. The Beacon Chain will probably be here in a few weeks to a few months...but I have 80%-90 % confidence that the beacon chain will go live in the third quarter of this year.”
The beacon chain is a major milestone in phase 0 of the Eth2.0 roadmap. The beacon chain will operate as the main chain of Eth2.0 and implement the proof-of-stake (PoS) consensus mechanism. This means that users can protect the security of the entire Eth2.0 network by staking (staking) ETH assets (that is, locking assets), and regularly receive corresponding rewards according to the amount of staking.
After Phase 0 is implemented, the next milestone in the Eth2.0 roadmap is Phase 1. As Ethereum researcher Will Villanueva said at the Ethereal conference, Phase 1 will involve implementing sharding and creating 64 shards The data capacity of each shard chain will reach 500 kb (the average block capacity of the current Eth1.0 chain is about 25 kb), which will allow the network to process more transactions.
The following phase 1.5 will usher in the merger of the Eth1.0 chain and the Eth2.0 chain, and the current Eth1.0 chain will continue to operate as one of the 64 fragments of the Eth2.0 chain.
The next phase 2 will usher in various applications and networks on the Eth2.0 chain to start communicating. According to Villaneuva, these applications can be very different in nature, and may also include blockchains such as Lbra and UTXO (such as the Bitcoin chain), and of course the Eth1.0 chain. As Ben said in his speech at the conference, this is when the real difficulties of Eth2.0 begin.
But of course, the sooner Eth2.0 starts going through this, the faster progress can be made.
Let's review the staking logic and potential costs and risks in Eth2.0, so that you can have a deeper understanding of this upcoming game-changing mechanism.
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Staking logic in Eth2.0
As mentioned above, staking ETH can earn rewards and secure the entire Ethereum chain. By staking your ETH and validating blocks correctly, you will be rewarded with ETH in the form of network interest rate (i.e. validator's rate of return) and a portion of network transaction fees. In short, the reward for participating in staking = the validator's annual income + network fee - the cost of running the validator.
The following figure shows the currently proposed maximum annual increase rate of ETH and the maximum annual rate of return of validators (it may change later):
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Source: EthHub
It should be noted that according to Vitalik Buterin, these are the largest numbers in the above figure. In practice, there are many factors that may reduce the total issuance of ETH and the rewards of validators. These factors include:
The validator goes offline. Combining individual punishment and collective punishment, every 1% of validators who go offline will reduce the total issuance by about 3%. If more than 33% of validators go offline at the same time, many ETH will be destroyed soon (due to punishment) .
Validators get slashed. This situation may rarely happen in practice.
ETH transaction fees get burned due to EIP 1559. According to this proposal, it is estimated that when the utilization rate of the Eth2.0 network is low in the early stage, about 10,000 ETH/year of transaction fees will be destroyed; eventually it may rise to hundreds of thousands of ETH transaction fees destroyed each year. (Note: EIP1559 proposal has not yet taken effect)
02. What are the minimum requirements for participating in Staking?
Each validator pledges at least 32 ETH;
A computer with sufficient hardware specifications;
connect to the internet;
03. What software do I need to run to participate in Staking?
When considering staking on Ethereum, there are two main types of software you need to understand:
1. Beacon Node: This is the hub for validators
Stores the canonical state of the chain, handles node synchronization, broadcasts blocks and attestations, etc.
Has a gRPC server for validator clients to connect to and provides a public API.
2. Verifier client: connect to the beacon node, communicate with the beacon node, and sign the block. You can run multiple clients and stake 32 ETH each.
Store important secret information such as RANDAO reveals and BLS private keys.
Can effectively switch underlying beacon nodes
Track shared state execution data and data blocks that validators have signed.
This means that there are three combinations of software that can be run:
Only run beacon nodes
Beacon node + 1 validator client
Beacon nodes + multiple validator clients
04. What are the hardware requirements to run the software?
Still to be determined. Ideally, we only need to meet the minimum requirements of the above three combined settings. (Note: According to previous Ethereum 2.0 researcher Justin Drake, it is expected that the validator client will be able to run on Raspberry Pi (Raspberry Pi) hardware (4GB RAM) "without trouble".)
05. What happens if I cannot connect to the Internet while staking?
The key to being a validator is ensuring that you can always vote on blocks (i.e. attest to blocks), thus keeping the network secure. Therefore, if your validator client goes offline at any time, there is a penalty in place to incentivize validator availability, depending on the situation. This happens in two scenarios:
If blocks are being finalized and you are offline, you lose x% of your deposit over a year, where x% is the current validator annual interest rate. For example, if the current validator annual interest rate is 5%, then you will lose 0.0137% of your deposit every day (note: 5%/365 = 0.0137%), but you will earn these rewards every day when you are online.
If the block cannot be finalized (i.e. more than 33% of validators are offline) and you are also offline, then you will lose 60% of your deposit within 18 days.
06. How long will my ETH be locked if I participate in Staking?
When you want to withdraw ETH from a validator, you will be put in a withdrawal queue. If there is no waiting queue for withdrawals, the shortest waiting time is 18 hours, and the time will be dynamically adjusted according to the number of people who are withdrawing money at that time.
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Costs and Risks of Staking
Participating in Eth2.0 Staking to get rewards is not a free lunch. Users need to consider many things before becoming a validator (staker). The following factors are the factors that every validator should weigh when considering whether participating in staking is "worth it" (this article does not consider the situation where users participate in Eth2.0 staking through third-party staking service providers):
Computing costs
Users need to run at least a validator client and most likely a beacon node as well. This requires computing resources.
As a rough estimate, the annual cost of running a beacon node is $120, and the annual cost of running a validator client is $60.
Capital acquisition and lock-up
Users must obtain the necessary 32 ETH, which can be obtained through purchase or mining;
After ETH is pledged, the pledger cannot directly sell the pledged ETH;
As mentioned above, if a staker wants to withdraw (exit from the system), the system sets a waiting time. But according to the latest Eth2.0 specification version, this waiting time has been greatly shortened. The minimum waiting time is 18 hours. But if many stakers are trying to withdraw at the same time, the wait time will likely increase, but 18 hours may be the norm.
code risk
Users also need to consider the code risks related to staking. This aspect of risk will attract more attention in the early stages of staking and may dissipate over time. It is important to distinguish between "client code risk" and "consensus code risk". If there is a consensus code risk in the network, it can be resolved through a network hard fork; however, the client code risk is more serious because it is difficult to distinguish it from malicious attacks.
Users need to ensure that their validator nodes do not experience downtime, or their stake could be slashed.
security risk
If a user runs multiple validator clients, the maintenance cost and infrastructure concerns are even greater.
This risk is similar to having ETH stolen from your wallet due to computer or mobile hacking. While decentralization brings autonomy, it also brings self-responsibility.
write at the end
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write at the end
