“What types of economic returns can biters hope to achieve?” was, perhaps, the most anticipated question in today’s Ethereum 2.0 Staking Panel at 2020 Ethereal Virtual Summit– at least from the point of view of a retail investor. The answer, however, is far from simple, according to Collin Myers, global product strategy at ConsenSys (which funds a Decipher).
Ethereum 2.0 is a massive network upgrade that will bring many improvements to the current blockchain, starting with the “zero phase”. Among other things, this will pave the way for a transfer from Ethereum to a proof of participation (PoS) consensus algorithm, moving away from the current proof of computationally intensive work (PoW) algorithm.
The main difference is that in PoS, users will be able to “involve” – basically, lock – their Ethereum, which will be used to check new blocks, thereby helping to support the network. Of course, biters will receive rewards for their contributions, and the greater their interest in the ecosystem, the greater the reward.
Myers said that the Ethereum 2.0 network must pass several important milestones before ETH holders can even begin to question the potential benefits of staking. First and foremost, the first block or “genesis” of 2.0 will only be discovered when the total quantity of Ethereum staked reaches more than 524,000 ETH, or approximately 16,000 validators.
“No one will receive a reward until this point is reached,” added Myers.
He also noted that the “zero phase” is a continuum and not a defined period of time, although developers expect it to last between 12 and 18 months, or even 24 months, according to some projections. The next major milestone is five million ETH staked – by which time the “first phase” will likely start already, added Myers.
So, what profit could the first biters expect?
“At the network level, at the outset, it was 20.3%, and at five million ETH staked, it fell to 6.6% – and this without charge integrated into your structure. There are a variety of different configurations that people can choose from. Our main focus has been on the individual “at home” approach, ”said Myers.
He explained that, from the genesis block, the maintenance costs of a validation node will cost users 4.75% of their rewards. As more Ethereum are introduced to the network, this percentage will increase, as the rewards themselves will begin to decrease.
“At five million ETH staked, the cost will drop to around 14.7%,” said Myers. “Which means that your net emission is essentially between 17% and 3.7% from the genesis to five million ETH staked,” he added.
Myers also warned all potential players that the Ethereum 2.0 network is designed to be “very open”, which results in a variable rate of return. Although the rewards should not be considered volatile, they still vary because “anyone can get in and out” of the system.
As Decipher reported recently, EthereumPrice.org also published a new UI tool to calculate Ethereum stake rewards after the network transfer to Ethereum 2.0 later this year.