Ethereum 2.0 Staking Guide

Ethereum 2.0 Staking Guide

Ethereum 2.0 (ETH 2.0) is one of the largest networks in the blockchain industry, aiming to provide a truly decentralized, permissionless platform for programmable money through the implementation of smart contracts. Now, the network is moving to Proof-of-Stake, promising attractive returns for all participants and also setting a starting point for a massive blockchain scaling solution. 

Anyone can participate in staking on the Ethereum 2.0 network. Stakeholders are assigned a crucial role in providing security to the network. Apart from being active stakeholders, users will also be given rewards for acting as validators. However, the biggest risk for stakers is the indefinite lock-up period and illiquidity of their ETH, which can be addressed by staking provider platforms such as StakeHound. 

ETH to ETH 2.0

The Ethereum core development team is currently launching a significant upgrade on the network, dubbed Ethereum 2.0. This upgrade involves the re-engineering of the entire Ethereum platform, introducing a new and more scalable version. From the current Proof-of-Work (PoW) consensus algorithm, the network is moving to the Proof-of-Stake (PoS) concept. 

It is common knowledge for experts that PoS is superior in almost all aspects to PoW, bringing benefits such as faster transaction speeds, greater performance, absolute finality, environmental sustainability, larger design space for economic incentives, and lower cost of security. The transition to PoS has always been the Ethereum roadmap since the very beginning, and its creator, Vitalik Buterin has published various research papers (1, 2, 3, 4, 5) regarding the proof-of-stake consensus algorithm. 

It has been a long road for this network to transition from its original proof-of-work mechanism. Still, the combination of increasing mainstream adoption and Ethereum’s scalability limitations helped accelerate this update and finally pushed it to start. Ethereum 2.0 is rolling out in three phases, starting from phase 0. All ETH staked during the initial Phase 0 is locked until the eth1 chain is folded into shard on eth2. Here’s a break down of the different phases: 

Phase 0 – Beacon Chain:

  • Introducing the ETH 2 Proof of Stake consensus layer 
  • Tracks ETH 2 validators and balances
  • One-way ETH deposit to stake on the Beacon Chain
  • No state management (transactions, smart contracts)

Phase 1 – Shard Chains:

  • Trial run for the ETH 2 sharding infrastructure (adding, storing, retrieving shard data)
  • Validators are now validating randomly selected shards (not the full chain anymore)
  • No state management (transactions, smart contracts)

Phase 1.5 – Migration of ETH 1 to ETH 2: 

  • Migration from ETH 1 to a shard on ETH 2
  • No full sharded execution 

Phase 2 – State Execution:

  • Adds execution to the remaining ETH 2 shards 
  • Fully operational sharded ETH 2 chain (incl. accounts, contracts, state across all shards.)

How to Stake with ETH 2.0

If you’ve decided to stake with Ethereum 2.0, there are specific requirements that you must meet to run a validator node. By doing so, you will be exposed to certain risks but will be rewarded for it. Here’s what’s in it for you if you choose to stake with ETH 2.0:

  • To run a validator node on the beacon chain, you must stake a minimum of 32 ETH. This means that ETH can only be staked in multiples of 32 per validator instance that is set up.
  • Once your ETH is staked, it will become locked up until phase 1.5. The launch of ETH 2.0 phase 1.5 is still uncertain, and this could take anywhere from 12-24 months or longer. 
  • Since users will be running a validator node, they are expected to have the right infrastructure to maintain it and validate Ethereum transactions. 
  • Users who choose to stake with ETH 2.0 will be receiving staking incentives with a minimum of 4.9% APY up to a maximum of 22.95% APY, depending on the number of validators and the amount of ETH has been staked. 

While it seems like staking with ETH 2.0 can be rewarding, especially with the incentives provided to stakers, there are some pitfalls. For example, funds will be locked up for a certain amount of time, making them illiquid and restricting you from using them for other things such as investing and trading. Stakers also face the prospect of being slashed if they cannot do their duty as a validator. 

Staking and running a validator node requires so much more than staking ETH. You also need both infrastructure and expertise. Users are faced with the critical decision to decide whether to stake with ETH 2.0 or alternative staking providers that eliminate the pitfalls and provide additional benefits. 

Staking ETH with StakeHound

StakeHound is a liquid staking provider that allows users to stake on ETH 2.0 without restrictions and limitations. When you stake with ETH 2.0, you are required to stake a minimum of 32 ETH. When you stake with StakeHound, there is no minimum deposit – lowering the barrier of entry for users who do not possess 32 ETH (US $18,000+). You don’t need to spend a significant amount of money to earn and enjoy passive income from the Ethereum network.

 

StakeHound vs. ETH2.0 – Comparison

Criteria

StakeHound

Ethereum 2.0

No lock-up period

18 months

No minimum deposit

32ETH (US $18,000+)

No reward slashing

X

No nodes & infrastructure

X

 

StakeHound also enables users to stake without any locked-in period. This means that your asset will stay liquid when you choose to stake with StakeHound platform. You also don’t need any infrastructure because you won’t be maintaining your own validator node. Users will also enjoy compounding interest on top of these benefits, making staking an easier option to earn passive income. Lastly, users will receive stETH upon staking with StakeHound. stETH is essentially a 1:1 representation of a staked ETH, which can then be used to participate in DeFi activities, such as providing liquidity, borrowing, or lending.

Staking with StakeHound lowers the entry threshold for investors and keeps your assets liquid. Find more info on our website and try it out now.

 

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