In this post, we will go over Ethereum Proof-of-Stake and how we can get ready to participate.

During September 2015, Ethereum’s Vitalik Buterin came up with a rough plan to make a switch into Proof of Stake (PoS) from the current Proof of Work (PoW) system.

Major problems with Ethereum’s PoW system are:

Insane energy consumption — BTC and ETH burn over $1 million worth of electricity and H/W cost per day

Mining powers are centralized — Over 50% of mining power in Ethereum is controlled by only three entities

Resources for PoW, energy & infrastructure, are not part of the system. — Large ASIC farms can conduct a 51% attack over and over

Serenity Update: Introducing Casper PoS protocol

Instead of computation-based proofing (PoW), the PoS protocol is based on one’s wealth. Stakers whose tokens are locked in a specialized wallet receive a dividend based on the amount of staked ETH.

Amount of Tokens locked = Mining power

During DevCon 4, Ethereum foundation came up with specifications to make a shift to Ethereum 2.0, which includes sharding, Casper PoS, and multiple improvements. Here is what we know so far:

Ethereum 2.0 (Serenity update) will take a step-by-step approach to implement pure PoS Casper FFG protocol with the new POS blockchain will co-exist alongside Ethereum and will allow validators to participate. (DevCon 4)* 32 ETH is set as a staking minimum in the sharding proposal (Vitalik’s twitter) Sharding will be implemented and upgraded sequentially as a part of Serenity update

*As of October 2018, a hybrid PoW/PoS mechanism, which was proposed as a key step to full PoS, has been discarded and will be moving directly to pure Proof-of-Stake

Ethereum PoS Staking: worth it?

As mentioned above, it is possible for anyone to participate as a validator by depositing 32 ETH into the Casper mechanism.

Profit from Staking = Validator Rewards + Network Fee

Validator Rewards — A reward for every block upon successful block creation.

Network Fee — Validators receive a cut of the transaction fees that people pay to use the network

Validator rewards (interest rate) versus total ETH staked — Twitter@econoar

The Return on Investment (ROI) from staking could vary upon the following:

Amount of ETH staked by validators (as seen from the table above)

Client/Node operation Cost

Future ETH value

Validators will need to run clients at a minimum and likely connect a beacon node to participate. The specifics around this are still being figured out.

Beacon Node: works similar to running geth/parity

Validator client: a lightweight client, need one for every 32 ETH stake

Assuming 10 million ETH are staked, a total incentive of staking corresponds to 3.80% + network fee per annum (minus operation cost). It is important to determine if staking ETH is worth by comparing net reward versus competition.

Getting ready for Ethereum PoS

Vitalik Buterin on how to best be ready for staking — Reddit

As Vitalik mentioned, it is important to have enough ETH and to keep yourself updated with Ethereum PoS. Recently, ETH price hit 17-month low at 89.70 USD. (as of December 12, 2018). Acquiring 32 ETH would only cost you less than 3,000 US Dollars. This could be a great opportunity to invest and prepare for Ethereum PoS.

Secondly, Ethereum 2.0 Prysm Demo has been released by Prysmatic Labs for you to try out. Check now to see how it feels to be a validator!

Verify your asset and join private the 32 ETH club at Whaley

And lastly, keep yourself up-to-date with Ethereum PoS staking by joining the 32 ETH club at Whaley. The 32 ETH Club is a Whaley telegram group which features:

Updates on changing Ethereum PoS system

Ethereum PoS experts to answer your questions

News about Ethereum and important Tweets from core foundation members

Sign up at Whaley, verify your exchange account/personal wallet and connect your telegram account. It’s completely FREE and no payment required.

Whaley is a cryptocurrency community with asset verification.

Also, feel free to check out our introduction:

Sign up, verify your asset, and join the groups with VIP perks!

Enjoy and please don’t hesitate to reach out with questions, corrections or feedback (email, twitter).