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Opinion: Should you be staking on Ethereum 2.0?

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Is staking a good idea at this time? What are the risks?

Original source: Crypto Valley

Original author: MyCrypto

Original translation: Li Hanbo

Ethereum 2.0 The deposit contract was deployed on November 4th, and a minimum of 524288 Ethereum was required for the successful launch of the first phase of Ethereum 2.0 on December 1st. This threshold was met and the launch of the Beacon Chain proceeded smoothly. Since then, more than 1 million ETH has been staked into the deposit contract.

Opinion: Should you participate in the pledge of Ethereum 2.0?

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.

What is pledge?

Do you want to pledge?

What are the risks and how to get started?

What is pledge?

Currently, Ethereum, like many other blockchains like Bitcoin, uses 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 power. Proof of Stake (PoS) attempts to address these issues, aiming to provide more decentralization than Proof of Work (PoW) is currently able to achieve.

Through Proof of Stake (PoS), participating validators will always pay attention to 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.

What is the creation event?

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.

Opinion: Should you participate in Ethereum 2.0 staking?

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 the 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.

Should I stake?

Your staked ETH and staking rewards cannot be withdrawn until Ethereum fully transitions to Proof of Stake.

This may take until 2021 or 2022, or even later than currently expected. Withdrawals are only possible after future upgrades are deployed to the network, in an upgrade process called "docking". In order for the Ethereum network to "dock", Phase 0 and Phase 1 first need to be deployed, which will allow the beacon chain and shard chains to interoperate. Phase 0 has just started and Phase 1 is expected to start in 2021.

Docking Also known as Phase 1.5, only then will the Ethereum network as we know it transition to a full proof-of-stake system, entirely powered by Validator, beacon chain and shard chain management. The Ethereum network as we know it today will become its own shard in this new system.

You have to decide for yourself whether you have the ability to stake your Ethereum during this time, especially when you will be able to withdraw in the future Cases that are unclear.

Can I make money from staking?

By participating in verification, you will be able to earn rewards for your efforts, just like mining. The amount of Ethereum you can expect to earn will depend on the total amount of Ethereum staked. The less Ethereum staked by the ecosystem as a whole, the higher the annual rewards for individual stakers, and vice versa.

The Ethereum 2.0 Launch Pad has a neat tool that allows you to see what kind of returns you can expect based on how much ETH you have staked in total.

Opinion: Should you participate in Ethereum 2.0 staking?

For example, if With 1 million ETH locked up 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.

Compared with mining, the benefit of the proof-of-stake mechanism 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.

What are the risks?

First of all, you need to remember that your Ethereum will be locked and therefore have no liquidity for an indefinite period of time.

Secondly, you need to maintain the infrastructure, which is your validator client. 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 the amount of money you would have earned 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 by approximately that amount.

You can avoid this by joining a staking pool, where validator clients and infrastructure will be maintained for you by others. However, this also presents other risks as you may have to relinquish custody of the assets so another party can handle the staking process for you. If the staking provider is untrustworthy or gets hacked, you could end up losing your funds.

Some major exchanges have introduced the possibility of staking Ethereum on their platforms, such as Coinbase, Kraken and Binance.

Ethereum 2.0 additional, indirect risks , is the possibility of new scams emerging. When the Ethereum 2.0 contract deposit address was exposed, a small number of imitators soon appeared.

Opinion: Should you participate in Ethereum 2.0 staking?

As development There will be more scams related to Ethereum 2.0, and you need to pay attention to these. The most important thing you can do is always verify everything at source.

How do I stake?

To start staking, you first need 32 Ethereum. That's not a small amount, roughly equivalent to $19,000 at the time of this writing.

However, you can still participate with less capital, offer less shares 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.

If you want to stake 32 ETH, you can go 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.

Summary

At this time, whether To stake is not an easy choice, there are many different factors to consider when choosing. If you can live with not being able to earn your gains for a likely few years, and you are confident you can keep your validator client running, then you might be able to make a decent profit on staking rewards.

At the moment, this is not an easy choice, and I strongly recommend that you continue reading this topic to make an informed decision. You can find a wealth of information on the official Ethereum website.