With Ethereum 2.0 edging closer, and with it an eventual Proof of Stake (PoS) consensus algorithm, many people want to know how much they will earn by staking ETH.
Ethereum 2.0 is a major network upgrade on that will shift its current Proof-of-Work (PoW) consensus algorithm to PoS, and as it does it will transfer the block validation function from miners to special network validators (stakers).
Stakers will have to lockdown an amount of ETH in a special wallet, and will receive the block reward for their contribution, and the more a person stakes, the more a person will earn.
How Much ETH Will You Need to Stake?
It’s believed that anyone wanting to become a staker will need to have 32 ETH locked up in the network, which at time of press is worth about $6758, which might be a little high for the average investor.
That said, there will be staking pools, as we have mining pools today, and anyone wanting to stake will easily be able to join a staking pool and earn their share of the pool’s reward.
How Much Will You Earn Staking ETH?
According to Collin Myers, global product strategist at ConsenSys, the amount someone will earn isn’t a clear and easy answer.
Speaking at Etherel Virtual Summit 2020, Mysers was clear in pointing out that ‘phase zero’ is a a work under progress and with no deadline, but they were hoping to get off zero within two years.
In doing so the following milestones would then have to be met, before ETH hodlers could even think about earning any staking rewards.
Firstly, the genesis block of Ethereum 2.0 won’t be discovered until the total ETH staked is over 524,000 ETH. The next major milestone would be five million staked ETH, by which time ‘phase one’ would have already begun.
When pressed about the earnings, Myers said,
‘At a network-level perspective, at genesis it’s 20.3%, and at five million ETH staked it drops down to 6.6%, and that’s without cost built into your structure. There’s a variety of different setups that people can choose. We’ve mainly focused on the ‘at home’ individual approach.’
Myers also said that starting from the genesis block, expenses for maintaining a validator node would cost users 4.75% of their rewards. And as more ETH is staked, this percentage would rise as the rewards would lessen.
‘At five million ETH staked, the cost will rise to about 14.7%,’ Myers said. ‘Which results in your net issuance essentially being between 17% and 3.7% from genesis until five million ETH staked.’
Myers also said that Ethereum 2.0 is designed to be ‘highly open,’ which will mean a variable rate of return for stakers, and while the return shouldn’t be volatile, it will fluctuate as ‘anyone can come in and out of the system.’
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Bringing it All Together
Taking into account what Myers said about the charges. Going by the Ethereum 2.0 Price Calculator, somebody who stakes 32 ETH, will earn 14.25% in the first year. And if left to compound for 10 years, they can expect to earn a staggering 279%.
This would mean earning of almost 90 ETH, but with operating costs fluctuating, it’s impossible to know an exact net earning. However, let’s estimate at the maximum cost for 5 million ETH staked, which would be around17%. This then would ensure a return of 74.7 ETH, and at today’s price that works out at $15761.
While this is just an estimate, it does highlight the possible profits a PoS consensus algorithm can offer, when the expensive electricity costs of PoW is eradicated.
We might be a couple of years away, yet, but Ethereum will evolve gradually into a PoS cryptocurrency, and when it does, it will benefit everybody.