How It Works: A Look Into Ethereum 2.0 Staking

3 min readMay 12, 2020

The key feature of the Ethereum 2.0 network, which will launch in 2020 with Phase 0, will be the network’s migration to the Proof-of-Stake algorithm. Staking will serve the same function that mining serves in Ethereum 1.0: it will allow ETH owners to profit from their investments.

The algorithm shift from Proof-of-Work to Proof-of-Stake will mark a huge change for the Ethereum network and its users. PoS will bring the following main advantages:

energy efficiency;
lower Ethereum’s inflation rate;
improved security and increased decentralization when compared to PoW.

The Basics of Staking

In order to start staking on the Ethereum 2.0 network, you’ll need to run a validator node and lock up your ETH in a deposit. This will allow you to take part in block generation: validators from all across the Ethereum network will be randomly selected to vote for new blocks. Then, other validators will need to agree on the voting results. This is how, in a nutshell, the consensus mechanism works.

As a staker, you will be able to earn rewards. However, the precise return rate has not been set yet. Vitalik Buterin initially suggested setting the annual rate between 1.5% — 18%, depending on the amount of ETH staked on the entire network. Justin Drake, an Ethereum researcher, proposed to set the validator return around 5%. Eventually, it was determined that the return rate should fall between 4.6% and 18%. You can use a tool in order to calculate approximate rewards for staking ETH.

Also, leading developers of Ethereum 2.0 came up with a solution that will help to maintain the integrity and security of the network. For instance, there will be small “penalties” that will incentivize validators to stay online. In addition, Ethereum will use “slashing”, a mechanism that will punish validators for malicious actions: a validator that is detected to have misbehaved will lose a portion of their stake or, in some severe cases, will be forcefully withdrawn from the network.

What You’ll Need To Start Staking

To participate in Ethereum 2.0 staking, you’ll need to stake at least 32 ETH. Hardware-wise, according to Justin Drake, most consumer-grade laptops should be able to handle several validator slots. You’ll still need to always stay online for block validation, however.

But there is a way to bypass these obstacles. For example, with the help of the Ethvalidator.io platform, you’ll be able to become a validator even if you don’t have 32 ETH or don’t want to use your own hardware for staking. Our platform will manage the process of staking on your behalf — you won’t need to run the software, or always stay online. Moreover, you’ll be able to join our decentralized pools by staking a minimal amount of ETH.

When You’ll Be Able To Begin Staking

You’ll be able to start staking ETH on the Ethereum 2.0 network as soon as Phase 0 launches. As suggested by ConsenSys, Phase 0 will be released before the end of 2020.

How Ethereum 1.0 and 2.0 will coexist

During the initial stages, Ethereum 1.0 and 2.0 will run in parallel. At Phase 0, you’ll be able to migrate your ETH to the Ethereum 2.0 “beacon chain”, which will be responsible solely for staking. At the same time, Ethereum 1.0 will handle tasks that are not related to staking (for example, computations for smart contracts and user transactions).

It will still be possible to mine on Ethereum 1.0 after staking is launched, however, mining rewards will gradually decrease.

You’ll be able to start staking as soon as Phase 0 is out. Thanks to mining pools and other members of the Ethereum ecosystem, almost everyone will have the opportunity to participate in Ethereum 2.0 staking.

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