Why the Arrival of Staking (PoS) Is So Huge for Ethereum
With Bitcoin’s 2020 halving event now just days away, all eyes in the cryptoeconomy are watching how the “digital gold” ecosystem fares its latest scheduled and highly-anticipated block rewards decrease.
With the macro situation being what it is right now, the intrigue is well placed. Yet once the dust settles after the coming months, it may be that crypto’s biggest event this year won’t have been the halving at all.
Instead, what if the most seismic development in the crypto space this year will be the arrival of Ethereum staking? I’d argue such a possibility is likely to pan out, and if it does, it’ll be huge for Ethereum’s momentum going forward. Here, let’s dig a little deeper into why staking will be such a big deal for the leading smart contract platform.
What Is Ethereum Staking?
Like Bitcoin, Ethereum is presently powered by a proof-of-work (PoW) consensus algorithm. This means that in their current forms, these blockchains rely on miners running specialized hardware to compete for validating transactions and creating blocks.
Later this summer, though, Ethereum will shift to what’s known as proof-of-stake (PoS) consensus. Under this model, users won’t have to run mining gear to secure Ethereum. Instead, ether holders will be able to stake, i.e. deposit, 32 ETH using a special process in order to become the validators responsible for processing blocks.
Moreover, just like Bitcoin miners earn block rewards in bitcoin (BTC) for their services, Ethereum stakers will earn block rewards in ETH for theirs.
PoS Arriving Soon
For now there’s still no set launch date for Phase 0 of Ethereum’s Serenity upgrade, which will activate PoS on Ethereum. However, that doesn’t mean we don’t already have a good idea of when to expect Phase 0.
“I have 95% confidence we will launch in 2020,” Ethereum researcher Justin Drake said back in February.
With that said, July 30th — Ethereum’s 5th birthday — is now being eyed by the smart contract platform’s developers as the next tentative target date for the beginning of Serenity. That seems viable, seeing as how community testnet efforts have been coming along well lately.
Topaz is performing very well!
22000 validators
Join the network today to test out ETH2 phase 0 before it launches
— prestonvanloon.eth (@preston_vanloon) April 24, 2020
Accessible and Not Resource-Intensive
For Ethereum, two of the main advantages PoS will offer over PoW is decentralization-friendliness and energy efficiency.
With regard to decentralization, staking on Ethereum will be very accessible. If users know how to make an Ethereum transaction, then they’ll have the requisite technical knowledge needed to stake 32 ETH. More importantly, Ethereum staking will be possible on inexpensive consumer-grade gear like a Raspberry Pi 4. These factors will make it easier for more people to stake, which will help Ethereum foster decentralization.
Beyond accessibility, staking will also require vastly less energy than mining, so Ethereum with PoS activated will be considerably more environmentally-friendly than Bitcoin with PoW. That’s notable at a time when climate change’s effects are becoming clearer all the while.
Makes Ethereum More Competitive with Bitcoin
The two dominant projects in the cryptoeconomy to date have been Bitcoin and Ethereum, and in that order. But what will the next decade look like for these projects?
Of course, the two top public blockchains are already designed very differently and do different things. Even still, where Ethereum really has a chance to keep gaining ground on the ecosystem’s OG is in continuing to double down on its key differences with Bitcoin. PoS represents a prime avenue to do just that, and as such it comes as another great differentiator for Ethereum.
Attacks Become Riskier, More Expensive
Due to the design of Ethereum’s coming PoS system, it will be extremely expensive and extremely risky for attackers to try to manipulate the “Ethereum 2.0” blockchain.
And that’s just talking about attempting an attack. Bad faith actors will have to put up so much ETH to attempt gaming the blockchain that most parties will be totally disincentivized to even try.
All it would take is for someone to challenge an attacker’s bad block, and then the attacker’s massive ETH stake would be slashed and partly given to the challenger. Not many people will be willing to take that giant risk.
1st in Series of Big Optimizations
Another reason why the arrival of staking is huge for Ethereum is because it will show the blockchain is actively evolving toward maturity.
PoS will be launched in Serenity’s first phase, but there will be multiple phases to follow thereafter. These coming phases will enact even more optimizations, like sharding and execution environments (EE), that will make Ethereum a true beast of a public good.
Accordingly, staking launching for Ethereum is a major development because it’s active proof the project’s ecosystem is successfully navigating the smart contract platform’s ambitious and forward-minded roadmap. If the community can pull Phase 0 off, then it can pull Phase 1 and Phase 2 off, too.
Will Lead to New Enterprises
Ethereum staking is also notable because it’s going to open up an entirely new staking infrastructure sector around the platform.
Indeed, the space has already seen some rumblings on that front from projects like RocketPool, a decentralized Ethereum staking pool in the making, and Bitcoin Suisse, which has built out an “all-in-one-staking solution” for Ethereum 2.0. And these are just the first of many such enterprises to come, undoubtedly.
That’s new companies, new jobs, and new economic activity then, and it’s all built around Ethereum. The possibilities and upside are there.
Coincides with Multiple Bullish Narratives
The advent of staking on Ethereum comes at a time when a variety of optimistic threads are coming together for the blockchain.
For one, consider how the project’s rising decentralized finance, or DeFi, arena has become a promising early star in the cryptoeconomy. And moreover, think about how nothing else in the space can compare to the NFT digital collectibles scene that’s sprouted atop Ethereum over the past few years.
When you combine these factors with the arrival of staking and the imminent implementation of EIP 1559, which will start burning ETH with every transaction, the picture starts to get really, really promising.
The Future Is Now
Ethereum staking is getting so close that folks can already start getting an idea for how much staking rewards they can soon expect.
For example, last week ethereumprice.org rolled out a new “ETH 2 Calculator” that lets users get a rough idea for how much ETH in staking rewards can be earned over 10 years. Right now, the tool projects that a starting sum of 32 ETH will become more than 121 ETH in a decade’s time. Not bad, right?
Even the fact that such a calculator is already available shows just how close Ethereum is to beginning to undergo its biggest transformation to date.
Looking Ahead
There will be challenges that come along with staking. One of the key ones is making sure that crypto exchanges don’t come to dominate the validation process on their client’s behalf. Stressing self-custody will be big for ensuring decentralization.
Beyond that concern, though, there’s a ton to be excited about with Ethereum’s shift to PoS. The ETH price may go up or it may go down this summer, but the arrival of staking is much bigger than any short-term price action.
It’s the future of Ethereum, it’s the security of Ethereum, and it’ll help power the project efficiently through all the on-chain activity that’s to come.
The post Why the Arrival of Staking (PoS) Is So Huge for Ethereum appeared first on Blockonomi.
OhNoCryptocurrency via https://www.ohnocrypto.com/ @William M. Peaster, @Khareem Sudlow