5 Important Reasons Not To Stake On Ethereum 2.0

Typically, staking is an opportunity to profit with “idle” cryptocurrencies. But Ethereum 2.0 may not be the best experience to start with, according to Vladislav Sopov.

The more ETH transferred to the Ethereum 2.0 deposit contract, the more investors seize the opportunity to catch the last train. Meanwhile, ETH 2 staking has some striking differences from similar Proof of Stake (PoS) and delegated Proof of Stake (DPoS) experiences.

Here are important caveats to keep in mind for anyone considering becoming an ETH2 validator:

Why might not Ethereum 2.0 stock be the best idea?

In short, the risks can be enormous to join Ethereum 2.0 due to an unprecedentedly high minimum stake amount and uncertain conditions for the launch of ETH 2. This is especially true for beginners and small stakes.

5 Key Reasons Not To Participate In Ethereum 2.0 Staking

Numerous observations, both economic and technological, show that the Ethereum 2.0 stake 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, 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’s almost equivalent to 1 Bitcoin (BTC).

This is the highest minimum stake in the entire history of the crypto segment. Even Vitalik Buterin, the inventor of Ethereum, shared his concerns about the possible whale dominant character of future Ethereum:

“As Proof of Stake, if you have some money, you can deposit that money and get more of that money. As Proof of Work, you can always make more money, but you need some external resources to do this. Therefore, it can be argued that Proof of Stake poses an increasing risk of concentration in the long run. ”

For comparison, the design of Zilliqa (ZIL) share through some brokers allows network enthusiasts to stake for just 1 ZIL or $ 0.02.

Uncertainty of the Road Map

It should be noted that the highly anticipated Ethereum 2.0 rollout scheduled for December 1 does not mark the beginning of staking reward payments. Fully-fledged Ethereum can take years to be released in shatter and shares, so it is very difficult to predict potential revenues when building investment portfolios. Therefore, while the approximate staking reward rates 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 has not 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 Staking 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 percent to 21.6 percent. While the endpoints of this chart are very unlikely to be selected as Ethereum 2.0 staking rewards, it is still unclear how long an Ethereum 2.0 investor should wait on APY.

Requirement to Maintain Working Time

Finally, potential users are concerned about the requirements of keeping an uptime, namely the necessity for verifiers to synchronize their computers online and with the network. Although Vitalik Buterin admits that staking operations can be profitable even with 60 percent uptime, even this “forgiving” level can be too high for inexperienced users.