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Typically, staking is an opportunity to profit from “inactive” cryptocurrencies. But Ethereum 2.0 may not be the best experience to start with, according to Vladislav Sopov.
The more ETH is transferred to the Ethereum 2.0 deposit agreement, the more investors take the opportunity to catch the last train. Meanwhile, ETH 2 staking has some notable differences from similar Proof of Stake (PoS) and Proof of Stake (DPoS) delegate experiences.
Here are some important caveats to keep in mind for anyone considering becoming an ETH2 validator:
Why might Ethereum 2.0 stocks not be the best idea?
In short, the risks can be huge to join Ethereum 2.0 due to an unprecedented minimum stake amount and uncertain conditions for ETH 2 launch. This is especially true for beginners and small stakes.
5 main reasons not to participate in Ethereum 2.0 staking
Numerous observations, both economic and technological, show that Ethereum 2.0’s share is not “one size fits all”. So what are these 5 reasons?
- Very high initial stake amount.
- Uncertainty of the roadmap in terms of staking rewards.
- Incredibly complex ETH1 / ETH2 transition process.
- Wide variety of possible staking reward rates.
- The need to preserve uptime
A year ago, when Ethereum (ETH) 2.0 was just starting to take shape, the developers announced that the minimum stake would be set at 32 ETH. At the time of writing, this amount exceeds $ 14,240. In short, it is almost equivalent to 1 Bitcoin (BTC).
This is the highest minimum bet in the entire history of the crypto segment. Vitalik Buterin, the inventor of Ethereum, also shared his concerns about the possible dominance of whales of the future Ethereum:
“As proof of the stakes, if you have any money, you can deposit that money and get more of that money. Like Proof of Work, you can always make more money, but to do so you need some external resources. Therefore, it can be argued that Proof of Stake poses an increasing concentration risk in the long run. “
For comparison, the design of the Zilliqa (ZIL) share via some brokers allows network enthusiasts to only aim for 1 ZIL or $ 0.02.
Uncertainty of the Road Map
It should be noted that the highly anticipated launch of Ethereum 2.0 scheduled for December 1 does not mark the start of staking reward payments. Full-fledged Ethereum can take years to release in shatter and stock, so it’s very difficult to predict potential revenue when building investment portfolios. Therefore, although the approximate reward rates for staking are known, it is still unclear when all validators will receive periodic staking rewards. What is clear is that the Ethereum 2.0 Phase 1 and Phase 2 presentations will be long and complex.
Incredibly complex ETH1 / ETH2 transition process
The transition between Proof of Work (PoW) and Proof of Stake (PoS) is something that hasn’t been achieved before. It is emphasized that generally a large infrastructure (decentralized applications, decentralized financial protocols, exchanges, etc.) depends on the integrity of Ethereum. Moving these objects to another blockchain will have damaging and unpredictable consequences for the global blockchain segment.
Wide variation of possible stake reward rates
The exact rates of Ethereum 2.0 staking rewards shown today vary significantly. Depending on the share of Ether supply actually invested for staking transactions, this indicator can range from 4.9% to 21.6%. While it is very unlikely that the endpoints in this chart will be selected as rewards for staking Ethereum 2.0, it is still unclear how long an Ethereum 2.0 investor should wait on APY.
Requirement to maintain working hours
Finally, potential users are concerned about the requirements for maintaining an uptime, namely the need for verifiers to synchronize their computers online and with the network. Although Vitalik Buterin admits that stakeout operations can be profitable even with 60% uptime, even this level of “tolerance” may be too high for inexperienced users.
