Staking on Eth 2
As of Tuesday, December 1st, 2020, the first step towards the multi-year Eth 2.0 implementation went live. Long-awaited Phase 0 finally launched and with it, the Beacon Chain and Ethereum’s new Proof of Stake (PoS) consensus layer. This marks an enormous milestone that has been on the roadmap from the early stages of the project in 2015. Phase 0 is the first of a three-part rollout of Eth 2.0 which is expected to officially conclude in 2022-23. Eth 2.0 already marks the largest, most decentralized PoS blockchain with over 120,000 validators with more staking options to become available in the coming months. The distribution of stakers by deposit amount (image below) also shows a nice distribution among stakers of all sizes (small to whale to institutional).
Notable entities that have been identified in the staking pool include Vitalik (6,976 ETH or 0.8%), Staked (104,224 ETH or 12.0%), Stake Fish (65,664 ETH or 7.6%), Cream Finance (16,000 ETH or 1.8%), Bitcoin Suisse (reported to deposit a total of 71,891 ETH), and CanETH (reported to deposit a total of 21,984 ETH).
Image credit: Delphi Digital
Eth 2
Staking yields from ETH 2.0 began at ~25% and trends down as more validators participate. In these early stages, over $9B in ETH has already been deposited for staking and yields ~8%. With PoS, ETH becomes more institutionally friendly given its robust infrastructure.
Over $9B worth of ETH has now been staked.
Some stats on network progress:
- ETH deposited to deposit contract: 3,900,000+ (~3% of all ETH)
- Current staking yield: 8%
- Active validators: ~120,000
- Pending validators: 1,000
- Network participation rate: 99.0%
The daily average of rewards earned per validator dipped to 0.007235 ETH this month. However, due to the price increase of ether, the USD value of rewards earned on the network increased ~80% over the same time period. Ethereum’s price increase looks to be supported by a steady increase in active addresses.
ETH staking diversification/decentralization is critically important to the network security just like miners in PoW. If one group, company, or pool gains too much influence over the stake, it could create issues for the network. So far, ETH distribution is fairly evenly spread out among big holders (companies) and smaller validators (individuals). Several projects and services are rolling out staking solutions for holders with less than 32 ETH, which should help further decentralize the staking pool makeup. According to Etherscan, roughly 50% of all ETH deposits are coming from cryptocurrency exchanges and staking pools (image below). This suggests an equal split between individuals choosing to stake using their own hardware and users choosing to rely on a third-party service provider to stake. It will be important to monitor shifts in this distribution over time as too much ether in the hands of a small number of companies could lead to centralization issues.
