Ethereum
$353.08 0.33%
ETH · 1w

Staking on Ethereum 2.0

About Proof of Stake

Proof of Stake emerged in 2012 as an alternative to the Proof of Work consensus model that Satoshi Nakamoto had chosen to implement in the Bitcoin network. Despite Bitcoin’s growing popularity, it had quickly become evident that the Proof of Work consensus was limiting its ability to scale and would ultimately become a ravenous consumer of energy.

As things stand, Bitcoin consumes more energy than the entire country of Switzerland. This is because the nodes on the network are required to solve complex calculations that require a large amount of electrical power, otherwise known as work. The work involved represents an investment that ensures the nodes will act in the interests of the network.

Proof of stake operates differently. In a Proof of Stake consensus, the nodes provide a financial stake in the form of network tokens to demonstrate their skin in the game. In the case of the Ethereum 2.0 Proof of Stake, nodes will be penalized by having part of their stake removed if they act against the interests of the network, for example, by validating invalid transactions

Many decentralization advocates maintain that Proof of Stake is more decentralized than Proof of Work due to the prevalence of mining pools and farms. As Proof of Stake doesn’t require any special machinery, the barriers to entry are lower.

How To Stake on Ethereum 2.0

In principle, anyone can get involved with staking once Ethereum 2.0 implements the first phase. In reality, stakers need to meet some basic requirements.

Firstly, there’s a minimum staking threshold of 32 ETH. If the price were ever to recover to its January 2017 all-time high of $1,400, the minimum stake would be worth close to $45,000. However, it’s also worth considering that in return for validating blocks, stakers will receive rewards paid in ETH, as well as a share of the transaction fees paid by users.

Aside from the financial stake involved, you must also be wi...

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