February 28, 2021

Cryptheory

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How to do staking with Ethereum 2.0

2 min read
staking Ethereum 2.0

How will it be possible to do staking when Ethereum 2.0 is launched? 

First of all, it has to be said that ETH staking will only be possible when Ethereum introduces Proof-of-Stake (PoS). 

For now the consensus algorithm is still Proof-of-Work (PoW), but with the launch of Beacon Chain, theoretically scheduled for December 1st, 2020, PoS will also be introduced. 

In fact, the Beacon Chain will be based on PoS, while the traditional blockchain, which will continue to exist for some time, will still be based on PoW. Therefore, as long as the Ethereum mainnet is still using the traditional blockchain, PoS will only be present on the Beacon Chain. 

This means that thanks to the Beacon Chain it will be possible to do staking even if the mainnet will be based on PoW for some time. 

The two ways of staking with Ethereum 2.0

There will be two different ways of staking with Ethereum 2.0

  • by running a validator node, 
  • by participating in a pool. 

Essentially the functioning of staking with ETH 2.0 will be substantially similar to that of other cryptocurrencies. 

The first way implies the execution of a Beacon Chain validator node. This operation is by no means trivial, and it is also expensive

In fact in order to be able to download, to launch and to execute one of these nodes it is necessary to put in staking a minimum of 32 ETH, equal to approximately $19.000 at today’s prices.

Moreover, running an Ethereum validator node is not exactly easy, but whoever wants to try it can follow the instructions provided on launchpad.ethereum.org, the website that shows how to become a Beacon Chain validator.

Alternatively, it is possible to deposit ETH in a pool.

There are already several ETH 2.0 staking pools available, and they have been gathered on beaconcha.in/stakingServices

There are different types, and with different parameters, so it is advisable to compare them and choose the one that best suits one’s needs. 

One thing in particular that is worth paying close attention to is whether or not these pools are custodial. In fact, if they are custodial, or if they are third-party services, it means that in order to participate it is necessary to give them possession of the tokens, without having full freedom to use them at will. In this case there is always the possibility, although sometimes remote, that the pool will not allow to regain possession of tokens, either because fraudulent, or because of malfunctions or theft, so it is advisable to choose a non custodial pool, or a trusted custodial one. 

This second method is very easy, because it is enough to subscribe to the pool and deposit ETH following its instructions. 

As far as rewards are concerned, it is estimated that they could range between 4% and 10% per year, but this is only an estimate. 

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