Ethereum 2.0 : 10 Things to Know Before Staking
While the arrival of Ethereum 2.0 is just a matter of months away, many are already planning to become network validators. Migrating from Proof-of-Work (PoW) to Proof-of-Stake (PoS), the Ethereum blockchain will allow anyone who wishes to stake their ETH and thus generate passive income.
Although the expected returns turn out to be attractive for ETH holders - between 5 and 10% - a few particularities should be known beforehand before embarking on the adventure.
1. A Minimum of 32 ETH is Required to be Eligible for Staking
To be eligible for staking when Ethereum 2.0 launches, a minimum of 32 ETH will be required, or approximately $ 8,000 at the time of writing.
However, many platforms should offer the intermediary role so that anyone, regardless of their portfolio, can also take advantage of this new functionality. The yield offered will however be lower than that of independent validators.
2. The More ETH will be Staked, the Lower the Return will Be.
As with other PoS blockchains, the annual yield offered to validators will be readjusted according to the number of ETH locked on the network. Here are the different levels known to date:
Number of ETH in staking: Maximum return for validators:
3. If you are using approved validation software, you probably won't have to worry about being kicked out.
The protocol includes a mechanism called "slashing" - translatable by sabrage - intended to sanction bad actors who submit malicious data to the network.
Using validation software developed by one of the Ethereum 2.0 implementation teams, you probably won't have to worry. The validation software must ensure that a validator follows the rules provided by the protocol.
The type of behavior that can be "slashable" is making changes to the base software or running multiple validation clients at the same time with the same keys.
4. Rewards and Penalties are Counted for Each Epoch (~ 6 minutes)
As part of the protocol, time is divided into 6.4 minute increments, called epochs, where tasks are algorithmically assigned to each participating validator.
At the end of each of these cycles, participation is counted and each validator who performs their tasks correctly receives a micro-reward or a micro-penalty depending on their involvement.
5. You Don't have to be Faultless
While using a validator with a high uptime helps maximize profitability, you don't need to run it from a supercomputer or have perfect uptime to make a profit.
The protocol will not slash inactive validators, but will simply subtract any additional gain in the form of penalties. This means that as long as your validator is online more than 2/3 of the time, you will make a profit.
6. Under Certain Circumstances, Inactive Validators Receive an Additional Micro-Penalty
The task of validators is to advance and complete the blockchain. If the chain ceases to be completed, as in the case where a large part of the validators simultaneously disconnect, the protocol will react to try to remove the deadweight and regain its purpose.
In the event that the chain has not been finalized for more than 4 epochs (~ 25.6 minutes), the inactivity penalties will be distributed, and worsen with each new epoch where the chain is not finalized. Note that if your validator continues to perform his duties during these periods, he will not be penalized.
7. You can Stop your Contribution even if it is Active.
If you decide to end your contribution to the network once you have started, you have the option of leaving it voluntarily. This exit procedure tells the protocol to stop giving your validator tasks to complete, which prevents you from earning additional rewards or getting additional penalties.
Also, even if you have ended your validator activity, that does not mean that your ETHs can be withdrawn. A subtlety of this exit process is that once a validator becomes active, it can only exit after at least 256 epochs, or around 27 hours. This ensures that each enabled validator is assigned a minimum amount of work.
8. You Cannot Re-enter the Network once you have Left it.
If you made a voluntary exit, or if you were excluded from the protocol, you will not be able to join it again. The one and only solution to reinstate him will be to make an additional deposit of 32 ETH and create a new validator account.
9. Your ETHs will be Locked for a Long Time
All staked funds will be locked at the protocol level until at least Phase 1 of the Ethereum 2.0 deployment. This includes the 32 ETH required for staking and all rewards earned regardless of whether you are out or not.
It is likely that the wait for the first investors to re-access their funds will be several years. Once the feature is fully deployed, the minimum withdrawal period is 18 hours. This period is dynamically adjusted according to the number of people already awaiting a withdrawal.
10. You Need to Plan for Subsequent Phases if you are involved from the Start
The Beacon Chain, which will be launched in Phase 0 of the Ethereum 2.0 deployment, was designed to be a lightweight chain. A simple Raspberry Pi 4 may even be able to operate it.
So, in case you decide to participate as early as phase 0, you should be aware that additional validation functions will be added in later phases and this will come with higher computational requirements.
Therefore, expect much more storage and bandwidth requirements. This does not mean that a supercomputer will necessarily be necessary, but it will be necessary to plan an upgrade as Ethereum 2.0 evolves so as not to be caught off guard.
With these 10 characteristics in mind, you now have the foundational knowledge to become an Ethereum 2.0 validator.
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