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The cryptocurrency markets is always changing. It can be hard to keep up with all the ups and downs, but one thing can always be counted on: staking ETH for Ethereum is always a great investment.
Ethereum 2.0 is the next big upgrade to Ethereum. It’s a major overhaul of the Ethereum network, and will be a huge step forward for scalability and security.
Ethereum’s upcoming Casper update will herald the introduction of one of the biggest changes in the network: Proof-of-Stake (PoS). Instead of costly mining, ETH holders will be able to validate transactions and secure the network by running nodes and depositing funds into their Ethereum address.
In this article, we’ll explain what exactly PoS is, how ETH works, and how you can start staking Ethereum 2.0 today!
What is Ethereum 2.0?
Ethereum is a blockchain platform with the primary goal of providing a decentralized, distributed computing environment for users to execute smart contracts. Ethereum’s current implementation of smart contracts (a set of scripts stored in the Ethereum blockchain that can be executed by every node of the network) is called Ethereum 1.0.
The planned implementation of Ethereum 2.0 will introduce a new kind of state transition system, which allows for coordination between different blockchain systems and creates a trustless mechanism for cross-chain interoperation.
The new system, called Casper FFG, will enable the validators (the participants who manage the integrity of the network) to ‘bet’ on different chains. These bets (called deposits) will allow them to earn rewards if they ‘win’ their bets, however, they stand to lose their deposit if they are proven wrong.
As part of this upgrade to Casper FFG, Ethereum will introduce sharding—a technology that splits up nodes in such a way that every node only processes transactions related to some subset of all Ethereum addresses—and thereby allows users to run full nodes with limited storage and computational power. This will support large-scale applications that require more scalability than what the main chain is currently capable of delivering.
Ethereum 2.0 Staking Explained
Ethereum’s version 2.0 upgrade will bring a major change to the platform. It’s called staking, and it will drastically improve how the Ethereum community runs its affairs. Staking is similar to the “mining” process that many cryptocurrencies use, but it comes with some key advantages over traditional mining.
Staking allows users to participate in the Ethereum blockchain without having to rely on expensive hardware or electricity. It requires you to send a small amount of ETH, which will be locked away for a certain period of time. During this time, you can earn more ETH by helping validate transactions on the network.
The first Ethereum staking waves are expected to begin during the fourth quarter of 2018, so now’s a good time to get acquainted with the concept before then—and be prepared for some of your ETH holdings to go missing for about a month as you stake them.
How Does Ethereum Staking Works?
Staking is the process of generating new ethereum blocks. If you hold at least 1% of all ether tokens, your computer becomes eligible to generate a block. The more ether you have, the higher your chance is to win this lottery.
The new block is generated through the proof-of-work algorithm. You need to find a nonce so that the hash value is lower than a certain number (the difficulty). Once found, you can submit your block to the network and get it verified. Then you get rewarded with newly generated ether.
Ethereum can be seen as a virtual computer that can run code, where the Ether token is the fuel to pay for your operations. When you put your Ether into a smart contract, you need to pay some extra Ether to perform the computations inside said smart contract. This is called gas, and it’s a unit of Ether that is used up with each computation.
The Ethereum Staking system enables users to stake their ETH tokens (symbol for ether), in return for the possibility of receiving transaction fees from the block they generate (which will be confirmed by other users).
So instead of paying directly with your ether to use each step of a smart contract, you’ll pay in ETH tokens. The way Ethereum Staking works is as follows: if you have 1% of all ETH tokens in circulation at a given moment, you will get 1% of each transaction fee generated within that same moment in time.
Is Staking ETH For Ethereum 2.0 Worth The Risk?
With the Ethereum network taking a new direction, many are asking whether or not it is worth it to stake ETH for Ethereum 2.0. In fact, this question plagues both current ETH holders looking to get on board with the new platform, and those who have no intention of switching but are debating whether or not to sell their ETH for a profit before the switch happens.
What we really need to know is whether or not you can count on Ethereum 2.0 delivering what it promises to be. Also, if the platform is stable enough long-term that you wouldn’t ever want to sell your newly earned ETH USDT (Tether) in exchange for BTC.
This is a difficult question to answer because we know that Ethereum has had some challenges in the past, and we don’t exactly know what kind of road they will be going down with their next fork.