Ethereum

FAQ's

What is Ethereum 2.0?

Ethereum 2 (or Ethereum 2.0) is the next generation of Ethereum: a major upgrade to the Ethereum blockchain network. This entails a change from using proof-of-work to proof-of-stake for the validation of blocks on the Ethereum blockchain. The current method of mining will then end and the network will be secured by validators who confirm transactions and include them in the blocks. Proof-of-stake will reduce the energy required to run Ethereum and helps increase its resilience to attacks. It also offers the opportunity to earn rewards by staking.

Ethereum 2 will also introduce a new structure: rather than being one chain it will consist of a beacon chain that communicates with several sharded blockchains (“shards”). This allows transactions to be carried out in parallel, increasing the transaction throughput and capacity of the network.

Ethereum 2 will be rolled out in several phases. Phase 0, the launch of the beacon chain, is expected in late 2020.

When is Ethereum 2.0 happening?

Ethereum 2.0 is launching in several phases, with the first upgrade, called the Beacon Chain, having gone live on December 1, 2020. The Beacon Chain introduces native staking to the Ethereum blockchain, a key feature of the network’s shift to a PoS consensus mechanism. As the name suggests, it is a separate blockchain from the Ethereum mainnet.

The second phase, called “the Merge” is expected in the first or second quarter of 2022 and will merge the Beacon Chain with the Ethereum mainnet.

The final phase is shard chains, which will play a key role in scaling the Ethereum network. Instead of settling all operations on one single blockchain, shard chains spread these operations across 64 new chains.

This also means that it will become much easier from a hardware perspective to run an Ethereum node because there will be far less data that needs to be stored on a machine.

The full upgrade to Ethereum 2.0 is expected to take place by 2023, according to the Ethereum Foundation.

How to migrate to Ethereum 2.0 ?

Users on the Ethereum 1.0 Chain will be able to lock up their Ether in a smart contract and will then be credited that same amount on the Beacon (Staking) Chain in Ethereum 2.0.

At that point they will be able to stake that Ether and begin to earn rewards directly on the Ethereum 2.0 Chain.

What are the minimum requirements to stake?
• A minimum of 32 ETH per validator
• Computer with sufficient hardware specs
• Internet connection
What software do I need to run to stake?
There are two main types of software to be aware of when considering staking on Ethereum:
Beacon nodes: This is the hub for your validators.
• Stores canonical state, handles peers and incoming sync, propagates blocks and attestations.
• Has a gRPC server that clients can connect to and provides a public API.
Validator clients: Talks to your beacon node and signs blocks. You can have multiple of these at 32 ETH each.
• Stores important secrets such as RANDAO reveal, proof of custody for shared data, and BLS private key.
• Can swap underlying beacon nodes efficiently.
• Tracks shared state execution data and data blobs that the validator has signed.
This means that there are three possible combinations of software to run:
• 1. Beacon node only
• 2. Beacon node + validator client
• 3. Beacon node + multiple validator clients
How long is my Ether locked up if I stake?

There is a withdraw queue that you are placed into when wanting to withdraw ETH from your validator. If there is no queue, then the minimum withdraw time is 18 hours and adjusts dynamically depending on how many people are withdrawing at that time.

Is there a risk to stake ETH?

The key to being a validator is to ensure that you are consistently available to vote for blocks which in turn secures the network.

Therefore, there is a slight penalty if your validator client goes offline at any point, in order to encourage validator availability.

There are two scenarios where this can happen:

• 1. If blocks are finalizing and you’re offline, you can lose x% of your deposit over a year where x=current_interest
• 2. For example, if the current interest rate is 5%, you would lose 0.0137% of your deposit every day, but gain that for every day you’re online.
• 3. If blocks aren’t finalizing (>33% of validators are offline) and you’re offline, you can lose 60% in 18 days.

If at any point your deposit drops below 16 ETH you will be removed from the validator set entirely.

How much can i earn when staking Ethereum 2.0 (ETH)?

The inflation is a sliding scale based on the Total Staked. So if total ETH stake is low, the issuance rate goes down and as stake rises, it starts to rise.

The total inflation issuance is then proportionally distributed between all stakers.

ETH validating	Max annual issuance	Max annual network inflation %	Max annual reward rate (for validators)
1,000,000	181,019	0.17%	18.10%
3,000,000	313,534	0.30%	10.45%
10,000,000	572,433	0.54%	5.72%
30,000,000	991,483	0.94%	3.30%
100,000,000	1,810,193	1.71%	1.81%

 

Additionally stakers receive a proportional share of the Daily Network Rewards (Transaction Fees).

Feel free to play with the above metrics in our Ethereum 2.0 Staking Calculator.