Opinion: Should you be staking on Ethereum 2.0?
Editor's Note: This article comes fromCrypto Valley Live (ID: cryptovalley)Editor's Note: This article comes from
Crypto Valley Live (ID: cryptovalley)
, Author: MyCrypto, translation: Li Hanbo, reproduced by Odaily with authorization.
Ethereum 2.0 deployed the deposit contract on November 4th, and the successful launch of the first phase of Ethereum 2.0 on December 1st required a minimum of 524,288 Ethereum. This threshold was met and the launch of the Beacon Chain proceeded smoothly. Since then, more than 1 million ETH has been pledged into the deposit contract.
With so much Ethereum staked at this point, you might be inclined to stake too. However, is staking a good idea at this time? What are the risks? The following are included in this article.
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What is a pledge?
Do you want to pledge?
What are the risks and how do you get started?
Currently, Ethereum, like many other blockchains such as Bitcoin, employs a proof-of-work (PoW) consensus mechanism. In this system, miners perform difficult mathematical tasks to package blocks and transactions.
This process is extremely resource intensive and consumes a lot of electricity. Proof of Stake (PoS) attempts to address these issues, aiming to provide more decentralization than Proof of Work (PoW) is currently able to achieve.
With Proof of Stake (PoS), participating validators keep an eye on the network and submit new blocks to include transactions. These validators work together to keep the network as secure as possible, and any bad actors will be punished by having some or all of their staked Ethereum burned. In the worst case, the staker loses all the Ethereum staked on the node, which is 32.
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The genesis event occurred on December 1st and refers to the creation of the first (genesis) block of the beacon chain. This means that the first phase of Ethereum 2.0 was successful and validators can propose new beacon chain blocks.
These validator clients will work to keep the beacon chain running smoothly. Normally now, the beacon chain is to keep track of all the shards in the network, but these are not implemented at this stage of Ethereum 2.0 and are expected to be launched later.
So validators maintain the beacon chain, but what is its purpose now? Right now, not a lot. The beacon chain itself is actually useless for the time being, but it is an important foundation for other future updates of Ethereum 2. If this foundation proves to be stable and well-functioning, future upgrades will have a better chance of success.
secondary title"docking "Should I stake?"dock"Your staked ETH and staking rewards cannot be withdrawn until Ethereum has fully transitioned to proof-of-stake.
That could take until 2021 or 2022, or even later than currently expected. Only after future upgrades are deployed to the network, called
, first phase 0 and phase 1 need to be deployed, which will allow the beacon chain and shard chain to interoperate. Phase 0 has just started and Phase 1 is expected to start in 2021.
Docking is also known as Phase 1.5, and only then will the Ethereum network as we know it transition to a full proof-of-stake system fully managed by validators, beacon chains, and shard chains. The Ethereum network as we know it today will become its own shard in this new system.
You will have to decide for yourself whether you will be able to stake your Ethereum during this time, especially if it is not clear when you will be able to exit in the future.
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Can I make money from staking?
The Ethereum 2.0 Launch Pad has a neat tool that lets you see what kind of returns you can expect based on how much ETH you have staked in total.
For example, if you lock up 1 million ETH for staking, you can expect an annual return of 15.7%. Keep in mind that even though you will be able to earn rewards, you will not be able to withdraw them until Ethereum fully transitions to Proof of Stake.
The benefit of Proof of Stake compared to mining is that you don’t need to invest in expensive hardware and high electricity bills. Anyone can become a validator as long as they have the minimum required ETH staked and can keep the validator client up and running.
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what's the risk?
First, you need to remember that your Ethereum will be locked and therefore have no liquidity for an indefinite period of time.
Second, you also need to maintain the infrastructure, your validator clients. If stakers cannot keep their validator clients running sufficiently stable, they may face penalties. You might be trying to keep your client running for years, which is no small commitment.
If your client is offline, you will lose approximately what you would have made if the client was online during that time period. This means that if you are programmed to earn X amount of Ethereum in a set period of time, you will instead be penalized approximately that amount.
Some major exchanges have introduced the possibility of staking Ethereum on their platforms, such as Coinbase, Kraken and Binance.
The additional and indirect risk of Ethereum 2.0 is the possibility of new scams. When the Ethereum 2.0 contract deposit address was exposed, a small number of imitators soon appeared.
As development progresses and versions emerge, there will be more Ethereum 2.0-related scams that you need to be aware of. The most important thing you can do is always verify everything at source.
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However, you can still participate with less capital, offer less stake to exchanges with staking features, or join staking pools. You can find a list of these pools here, but remember that you will have to do your own due diligence to find which pool is best for you.
Summarize
If you want to stake 32 ETH, you can head over to launchpad.ETH.org to start the staking process. This requires you to run an Ethereum 2 validator client such as Prysm, Lighthouse, Nimbus or Teku.
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