Can traders switch to staking after Ethereum 2.0 upgrade?

The Ethereum network is in the final stage of its transition to the Proof-of-Stake consensus mechanism, with the 'merge' of the beacon chain and the Ethereum mainnet happening shortly this year. The beacon chain was created in 2020 to test the staking consensus mechanism.Ethereum 2.0 will allow holders of ether, Ethereum's native token, to passively stake their coins to verify transactions and maintain the security of the network. The validators will be rewarded with newly minted ether coins for their participation.This presents a new passive investment opportunity for traders who could previously only actively invest through the action of buying and selling ether.In the previous Proof-of-Work consensus mechanism, transaction verification and adding blocks to the network required high levels of computational power. This would lead to excessive consumption of energy, not to mention the initial cost for the appropriate hardware required for mining.Also Read: What are Ethereum killers and how far have they come?Staking does not require an energy consumption model, nor does it require complex computational hardware. It only requires a user to have a digital wallet and a certain amount of ether holding.How can traders switch to staking?Traders have two options to stake in the Ethereum network: staking themselves on the network or using a custodial platform to take part in staking.Traders who want to become validators on the network need to put up 32 ethers as collateral from their wallets. They should also remember that the funds they lock up for staking can be slashed if they go offline or produce faulty blocks on the network. Validators will be assigned blocks at random, but the more ether a person stakes, the higher their chance to validate transactions and produce new blocks. This means that users have more opportunities to get rewards if they stake more ether.You can use custodial staking systems or platforms to start staking. These platforms handle the complete staking process on your behalf. They run and manage the node, so you do not have to. It is also not necessary to stake 32 ether as custodial platforms have lower entry barriers that vary depending on the provider.But the downside of a custodial system is that they are in complete control of the validator node's private keys. This means that only the third-party provider can manage the node. Some providers will also take a cut of the staking profits in exchange for their service. Some common examples of custodial service providers are exchanges like Kraken and Coinbase.On the other hand, if you go solo, then you must stake at least 32 ether tokens to become a validator. You will need to download both Ethereum 1.0 and Ethereum 2.0 clients. Fortunately, there are several Ethereum clients available for free on the internet, such as Teku, Lodestar, and Nimbus.Solo validators also must download both Ethereum 1.0 and Ethereum 2.0 blockchain. Keep in mind that Ethereum blockchain 1.0 is 900 Terabytes in size, and it grows by 1 Gb every day. Solo validators also need to have their nodes always connected to the blockchain so a reliable internet connection is necessary.What yield can you expect from staking?The yield from staking is always proportional to the number of coins you stake. So, to earn more ether, you need to lock in more of ether tokens.In a telegram chat with Coindesk, Alex Kruger, a trader and analyst, said that he believes that yields will be around 10 to 15 percent. At the same time, blockchain analytics and intelligence firm, IntoTheBlock, expects the returns to be higher than the US consumer price index, which stood at an all-time high of 7.2 percent in February."Through the merge with the proof-of-stake chain, fees previously earned by miners will pass on to being earned by those staking. This is expected to result in staking rewards between 7% and 12%," IntoTheBlock said in its weekly newsletter published on Friday.Also Read: Ethereum 2.0 | Why this network is switching to proof of stake and how it will workShould traders participate in Ethereum staking?Traders who have a healthy amount of ether in their wallets should consider staking it. They could lock up their ether funds that would have been sitting idle in their wallets anyway. It is an excellent way to get an annual percentage rate of around 6 to 15 percent.But they should be wary of the risks of slashing and should also keep in mind that their funds will be locked up for a substantial amount of time. This might not be a good idea for someone looking to invest in other decentralised applications on the Ethereum network for which they will require ether.Also Read: How to modify or cancel transactions on Ethereum blockchain

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Can traders switch to staking after Ethereum 2.0 upgrade?

By CNBCTV18.com Mar 24, 2022 2:20:49 PM IST (Published)

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Can traders switch to staking after Ethereum 2.0 upgrade?

By CNBCTV18.com Mar 24, 2022 2:20:49 PM IST (Published)

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