Ethereum 2.0 – All You Need To Know About Staking ETH

The highly anticipated Ethereum 2.0 deposit contract was released on Nov 4. Now, interested users can deposit their required 32 ETH in the contract, in anticipation of the Genesis or the Ethereum Phase 0 launch date set for Dec 1, 2020! However, contributing to the new mainnet isn’t a light undertaking and we will discuss that in detail in this article.

But first, a little recap. Ethereum 2.0 will employ the Proof Of Stake (POS) so users will require to put in their “stake” to act as validators on the new network and receive ETH rewards for participation. The validators will be the new “miners” supporting the network and processing activity, instead this time without burning electricity. But just as there are rewards, there are also penalties for making mistakes or acting maliciously.

All deposits to the contract are one way and irreversible. Because of various reasons, the transactions can’t be performed on the new network and as such the staked ETH or rewards can’t be transferred or sold. They will become available in 1-2 years once Ethereum 2.0 Phase 1 kicks in and enables transfers. So, staking currently is a serious commitment with funds getting illiquid for a long time.

1. Ethereum 2.0 Requires 524,288 ETH to Go Live

The principal requirement for launch is that users deposit 524,288 ETH ($218M+ at current prices) or equip 16,384 validator setups to make the new launch. There have been extensive debates about whether this number can be reached or not, but the progress so far has been promising. According to Ethereum foundation’s official Ethereum 2.0 staking website Launchpad, around 40,165 ETH have already been deposited in 4 days!

2. Vitalik Buterin Contributed 3,200 ETH for Ethereum 2.0 Genesis

As a sign of his confidence and commitment to the network, Ethereum co-founder contributed 3200 ETH (~$1.3M) to the deposit contract. The contributed amount is enough to run 100 validators and it might have been chosen for symbolic reasons.

3. Ethereum 2.0 Staking – Rewards, Limitations And Penalties

Ethereum 2.0 staking will provide an Annual Percentage Rate (APR) of 21.6%, at the minimum amount of 524,288 ETH required for launch. The returns are higher at first, because validators need to be incentivized to contribute the amount, which will keep falling as more validators join in.

Ethereum 2.0 Staking Rewards - Launchpad
Ethereum 2.0 Staking Rewards – Launchpad

While there are high rewards for staking ETH in the new iteration, there are penalties for not maintaining enough uptime to process activity and finalize blocks, acting in bad faith and contrarily to the health of the network. This is done to ensure that participants act in good faith or lose rewards through minor penalties or the more serious slashing.

Any validator with 50% or 16 ETH of the 32 ETH slashed by the network for any reason is automatically ejected. It is advisable that users only stake if they have the required resources and technical knowledge or otherwise simply participate in a staking service like ANKR. Other services also would become available later, from exchanges and other blockchain companies.

4. Ankr Offers Ethereum 2.0 Staking Service

Ankr is currently offering a staking service for Ethereum 2.0 via its Stkr platform. It allows participants to stake with less than 32 ETH (min 0.5 ETH), use a synthetic asset called aETH and operate without much technical expertise/hardware required for such purpose. For this purpose, it divides the work between fund providers, hardware providers, maintainers and ANKR stakers.

The platform can assist with enabling more users to participate, connecting validators with hardware and technical expertise with funds, enabling more people to serve as validators by allowing them to deploy Ethereum 2.0 node with streamlined one-click process and enabling users to trade staked ETH that would otherwise be illiquid (staking rewards can’t be withdrawn or traded though).

Ethereum 2.0 staking
Ethereum 2.0 staking© Cryptoticker
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