The world is preparing for an energy crisis, and the fact that PoW miners consume too much electricity is a serious problem. Scalability and power consumption are becoming critical issues as cryptocurrency goes mainstream and tries to position itself as a legitimate and useful technology.
But let's discuss the measures that Ethereum has taken to solve these problems. In its latest update, ETH 2.0 switched from Proof-of-Work (or PoW) to Proof-of-Stake (PoS) to improve scalability and security. It is expected that this will affect the mining process and increase the energy efficiency of the blockchain. This gives crypto enthusiasts more opportunities to interact with the coin, such as participating in Ethereum staking. We will discuss this point in detail below.
Staking Ethereum
Staking ETH 2.0 is freezing Ethereum coins on the deposit of a smart contract in order to be a validator and join the service of the ecosystem, receiving payment for it. The validator, like the miner, verifies the transaction and looks for the hash signature of the block, but spends much less energy on this.
Blocking coins is necessary to ensure that this node will not act at the expense of the system, because in this case it will also be damaged. To start staking Ether, a validator must stake 32 ETH (which is about $50,000 at the end of January 2023). The rate fluctuates constantly, but in any case it is quite a large amount.
To gain full control over Ethereum staking, you can set up your own node. You don't need to embed ETH or be a miner to do this. In fact, miners and validators only cover every second node. Having your own node eliminates the need to trust third-party information about the state of the network. This is the main reason for creating a node - people prefer to completely control the situation from the outside.
How to Stake ETH 2.0
If you want to be a validator, prepare 32 ETH. Luckily, this is not the only way to join. Validators give small ETH holders the opportunity to transfer their coins to them and receive income from staking.
Here are the three main ways to stake ETH:
- Centralized exchange. Coinbase and Binance help ETH stakers get started. This method is the simplest and is suitable for beginners. You just need to choose a service and take a few steps to register, buy ETH, stake them and start profiting from your ETH.
- Staking pool. This one is a little more complicated and requires effort and time to get into it. However, it has its advantage: users can use liquid tokens instead of staked ETH.
- Setting up your node. The most difficult but ambitious way. If you plan to do this, you will have to stake 32 ETH and have a computer connected to the Internet every day and night.
Please keep in mind that you will need to do your own in-depth research to decide whether you want to bet or not and choose the right way to join the bets.
Why set up a node and stake ETH?
As we mentioned above, an important reason to run your node is the ability to independently manage staking and monitor the state of the network. Surely there are other reasons to highlight:
- Privacy and security. Running your node gives you the opportunity to prevent personal information from leaking to third-party nodes.
- Censorship resistanceYou get guaranteed access when needed and protection from censorship.
- Decentralization Improved protection against centralized points of failure. Network resilience develops as more nodes appear in different places, managed by different people.
- Independence. When you run a personal node, you receive an individual copy of the Ethereum blockchain and manage your coins.
Okay, we get it. Setting up a node can be very useful for those who want to make a profit from betting. But why should you participate at all? You will lock your ETH for a long time - someone will consider this option impossible, since they simply do not own that much ETH or are ready to spend it on other purposes.
The main reason for deciding to join staking is to receive an annual interest rate of 7% to 15%. After investing 32 ETH, you can expect to receive something from 2 to 5 ETH, taking into account the current value.
Network assistance is another explanation why people stake ETH. The nodes, which are actually individual computers that have staked ETH and are running, must confirm that the network is legitimate. So if you want to help the network and get a piece of it, go ahead.
Running a Node
If you decide to launch your own node, here are a few preparation tips.
In the earlier stage, users had to interact with the command line to work with the node. If you're experienced enough, check out full guide on how launch an ETH node.
Currently, Ethereum gives everyone the opportunity to join staking and create individual nodes with minimal effort. The developers created DAppNode, a completely free and open source software that allows users to manage their nodes. To set it up, you need to read the overview and install the correct DAppsNode type.
An additional option is to use equipment. Minimum specs for your PC: 4-8 GB RAM and 2 TB SSD.
How to start an ETH node?
Step 1: go to https://launchpad.ethereum.org< /a>, check the general information and click “Become a validator”.
Step 2: If you don't know how Proof-of-Stake works, read the information on the page carefully and then click Continue.
Step 3:
- Confirm that you understand that the Beacon Chain transaction is irreversible and that you must send 32 ETH to become a validator. < li> Confirm that you can technically set up and run a validator.
- Accept that your validator will remain online and updated.
- Agree to the rules for punishing bad behavior.
- Accept that the keys are your responsibility and that your seed phrase will be the only way to withdraw your funds.
- Confirm that you understand that you cannot transfer your stake for some time, and you will not be able to withdraw it until the merge.
- Accept the possibility of various errors as you are an early adopter.
- Review the betting checklist.
- Agree with Terms of Use.
Step 4: Select one executable client. You will be given 4 to choose from.
Step 5: Select a consensus client (again, from 4 options).
Step 6: Create key pairs by selecting your OS and key generation method.
Step 7: Upload your deposit details. This is necessary to link the wallet and lock the coins on the smart contract.
That's all! Your node will be launched after you complete the setup.
Conclusion
Staking is the cornerstone of Ethereum 2.0 - with The Merge, its energy consumption will be reduced by almost 100% compared to the time of the PoW algorithm. Other improvements such as scalability and processing speed are planned for the future.
Financial analysts are predicting revenue growth with the upgrade, and right now Ethereum staking seems like a great chance to join the network and contribute to it while earning some rewards.
