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What Is Ethereum Staking? Ethereum 2.0 Explained

If you’re a Bitcoin investor, you’ve probably been hearing a lot about Ethereum lately. The Ethereum Foundation is in the middle of upgrading Ethereum to Ethereum 2.0, which brings some important improvements. One of these new Ethereum upgrades is involved with Ethereum’s staking process. This reflects a change every blockchain investor should be familiar with.

So, what is Ethereum staking, and why is the upgrade to Ethereum 2.0 a big deal? Let’s take a closer look.

What Is Ethereum 2.0?

Ethereum 2.0 refers to a series of long-awaited updates to the Ethereum cryptocurrency. These updates look to make all the processes surrounding Ethereum better and faster than ever.

Some of the big changes coming with Ethereum 2.0 include fixes with mining and scaling issues, and security issues through a proof-of-stake solution. With Ethereum 2.0, investors can expect faster trading, changes to the way Ethereum is mined, and a more secure experience overall.

We’re entering the final stage of the Ethereum 2.0 upgrade now, called Serenity. Serenity marks the completion of the Ethereum 2.0 upgrade. Serenity offers a whole noew chain that runs along side the current one, both of which are fully compatible with one another.

The Big Changes in Ethereum 2.0

There are a lot of big changes coming with the rollout of Ethereum 2.0. Here’s a quick rundown of the main ones.

Sharding: To put it simply, sharding refers to splitting the Ethereum database into smaller parts. This will improve transaction speeds and make for a faster network.

eWASM: Expands the coding capabilities for the Ethereum Virtual Machine and lets code execute faster.

Proof-of-Stake: A new way of mining Ethereum. Look below for a more in-depth look into this.

Plasma: A new layer in the Ethereum network. This allows for lot more transactions to happen at a time. Think the Bitcoin Lightening Network, but for Ethereum.

Raiden: Like the Lightening Network, an off-chain scaling solution. 

Serenity: The major upgrade including proof-of-stake, eSWASM, etc. that runs on a tandem chain.

As you can see, there are a lot of new things coming with Ethereum 2.0. If you’re a crypto investor, or you’re looking to get into crypto, you have a lot of reasons to get excited.

What Is Ethereum Staking?

Essentially, Ethereum staking allows you to invest a certain amount of your Ether in a blockchain for a reward later down the line.

Ethereum Staking runs on a proof-of-stake consensus model. Based on the value of a given stake, interested investors are assigned blocks to validate, allowing them to earn rewards for it. For example, if you stake 2% of the value, you can validate 2% of blocks.

This is a big change from Ethereum and Bitcoin’s usual proof-of-work staking system, which assigns blocks based on computing power rather than value. Proof-of-stake, however, is more energy-efficient than proof-of-work. It doesn’t require specialized hardware, and allows more investors to take part, rather than just those with high computing power.

How to Stake on Ethereum 2.0

Ethereum devs are working their hardest to make staking with Ethereum 2.0 easy. Essentially, all you do is lock your stake in and wait — it’s that simple.

To stake with Ethereum, you need a minimum of 32 ETH. Validators need to run a validator node. This is where one of the highlights of the proof-of-work system comes in — you can run validator mode from any computer or laptop, it doesn’t have to be a top-of-the-line machine.

Be warned, though: If you want to be a validator, you’re going to need to keep your connection running consistently. You may face penalties if you don’t.

You’re looking at an estimated 4 to 10% return staking Ethereum.

Staking Pools

Another option you have regarding Ethereum Staking is joining a staking pool.

A staking pool sees multiple people come together to stake a claim as one validator. Every user in the pool puts a set amount of their funds into a single wallet, which is used for the stake. This increases the chances of the pool wallet being picked for the stake reward.

It also means splitting the final sum between everyone in the pool, which can mean a little lower of a yield. Staking pools are a great way to passively earn income through Ethereum. You also don’t have to lock any tokens for any amount of time, which is a major upside for some.

Is Ethereum Staking Worth It?

Staking with Ethereum 2.0 is full of potential.

The best reason to staking Ethereum 2.0 is to generate free crypto simply by holding it. Rather than having your Ethereum sit around, you might as well stake it and make income without lifting a finger. It also lets you actively engage with blockchain projects, which can be a great experience.

Locking your Ethereum down for a set amount of time can also be a risk, though. It means you can’t pull out and sell your Ethereum if the market crashes. There’s always the potential that your rewards could make up for this, but it’s not a guarantee.

Staking pools can also be a bit scary, as you’re entrusting a set sum of your Ethereum to strangers. If you’re going to stake with Ethereum 2.0, be safe and play carefully. Keepy your keys private, and only stake what you’re comfortable with.

What Will Ethereum be Worth in 2020?

It’s hard to determine what Ethereum will be worth in 2020 and beyond, but the numbers look promising.

In January, Ethereum was worth around $180 US. As of June, Ethereum is worth a more hopeful $225.71 US, a number that’s been rising since April. There’s a good chance Ethereum will only get more valuable as Ethereum 2.0 rolls out.

There’s Never Been a Better Time to Invest in Ethereum

With Ethereum 2.0 around the corner and consistently rising value, now is a great time to invest in Ethereum. Don’t be scared to dip your toes in the water whether you’re a new investor or a seasoned veteran. You might just come out the other end a much wealthier person.

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