Connect with us

Blockchain

Ethereum 2.0: The Choice Between One’s Own Node and a Staking Service

Avatar

Published

on

As the Ethereum 2.0 upgrade approaches, users have been showing an increasing interest in the staking process, which would allow them to make a passive income by validating the new network.

This is evidenced by the growing number of Ether (ETH) wallets and ETH deposits on cryptocurrency exchanges. According to a recent report published by analytical company Arcane Research, the number of Ethereum wallets containing 32 ETH or more — the minimum amount of coins needed to run the staking node — have increased by 13% over the year, and the number of “Ethereum 2.0” Google search queries have grown by around six times since March.

While some users have already opted to run their own validator node, others are still choosing among becoming an independent validator, joining a staking pool or using staking provider services. But is there actually any difference?

How will staking work?

The upgraded Ethereum network will switch from the proof-of-work to the proof-of-stake consensus algorithm, replacing miners with validators who will bet their coins to verify transactions. Once validators verify honest transactions, they will receive the rewards in the form of passive income — this process is called staking.

At the moment, the exact size of an annual reward for Ethereum stakers is still unknown. However, according to the project’s roadmap, this value will vary from 1.56% to 18.1% and will be inversely proportional to the total number of validators: When the network increases, rewards contract.

On the one hand, a staking model can be attractive to a wide range of crypto users because there is no need for expensive mining equipment or special technical skills and might look as simple as having a bank deposit. All that is needed to receive annual interest on staked funds is to store ETH on a hardware wallet.

However, an in-depth analysis of the requirements for becoming a validator on the Ethereum network has shown that not everything is as simple as it might seem at first glance. The minimum entry threshold of 32 ETH is just one of such requirements.

Related: Ethereum 2.0 Staking, Explained

For example, given the ETH exchange rate of $250, the user will need to invest $8,000 to become a validator on the Ethereum 2.0 blockchain. But what about the reward? Taking into account the cost of validation of $180 and an average reward of 5% suggested by Ethereum developer Justin Drake, the annual profit from staking 32 ETH can be around $190. So, given the possible risks of Ether’s price experiencing volatility and users being unable to withdraw funds, this reward model is unlikely to allow an average staker to hit a big jackpot.

Another task users will have to deal with to be a full validator is running their own validator node. As evidenced by a survey published by Consensys, 33% of the ETH users are ready to perform this task. But that’s not all. Additionally, validators would be required to ensure the uninterrupted functioning of the hardware wallet. If users disconnect, they lose all their daily income. Even worse, if at some point their stakes drop below 32 ETH, users will lose the right to be a validator.

The Ethereum staking entry threshold is not as high as the cost of running a master node on other blockchain networks, such as Dash, and for many users, high barriers to enter may be unaffordable. That same survey conducted by Consensys also showed that 33% of ETH owners do not intend to participate in network staking, and 71% of those who refused said that they do not hold enough Ether to become a validator.

Third parties come to the rescue

The above-mentioned limitations can be circumvented if joining a so-called staking pool or staking-as-a-service providers. Such third-party services — either decentralized or centralized — offer staking on the users’ behalf and relieve them of the need to worry about launching special software or keeping the network online during the life of the staking deposit. And if launching one’s own node can be compared to opening a deposit account at a bank, then staking providers act as brokers, taking on all the risks and maintenance expenses for a certain fee.

The biggest advantage of such solutions is the ability to earn on staking with any amount of ETH, which becomes a way out for many users who cannot afford to keep their own node. According to Consensys, at least 33% of Ethereum users plan to use third-party services and 20% of the respondents who previously revealed the intention to run their own validator nodes said they would consider using a staking service instead. This raises the question: Which is the better option — a staking pool or a staking-as-a-service provider?

Staking-as-a-service on crypto exchanges

Today, many crypto exchanges offer staking services for PoS-based coin owners with daily income payments. For example, Poloniex does not impose any requirements on the terms of deposits — the user can trade and withdraw funds at any time. For this, however, users are charged a 25% fee on their rewards, which is said to cover operating expenses and risks associated with the management of the service.

Bitfinex, another major crypto exchange, claims that it doesn’t charge a fee for its current staking programs, holding a small portion of staking rewards instead. Additionally, as stated on Bitfinex’s website, in some cases, its staking service provider can also take a portion of the rewards collected through the exchange. Meanwhile, staking services provided by Bitfinex are available for any category of users since it’s enough to have as little as $0.10 to start receiving rewards on the platform.

Paolo Ardoino, the chief technology officer at Bitfinex, revealed to Cointelegraph that the cryptocurrency exchange has the biggest Ethereum cold wallet and is planning to be a key part of Ethereum staking. According to him, Ethereum staking will be quite profitable for users who keep their funds on exchanges:

“Exchanges like Bitfinex will charge a tiny fee to cover operation costs, but the large majority of rewards will go directly into the pockets of the users. Not all users want to go through the process of custodying their own assets and learning how to stake properly.”

Changpeng Zhao, also known as CZ, the CEO of Binance crypto exchnage told Cointelegraph that users who actively stake via Binance will be able to earn higher interest rates than those who simply hold cryptocurrency in their accounts:

“Binance will stake a fractional reserve of the Ethereum held by our users, as we still require some funds to be liquid for users to withdraw at any time, while automatically distributing proportionately the rewards to our users.”

Another convenience of centralized platforms and custodial services is that they undertake the conversion of the user’s ETH to ETH2. Cryptocurrency services provider Bitcoin Suisse, for instance, claims that it doesn’t charge any commissions for such a conversion, however, it will take 15% from rewards received by its customers. The platform also promises to monitor the timely update of its own software so that the staking process remains uninterrupted and beneficial for the user.

However, according to some users, staking programs offered by crypto exchanges can lead to the centralization of the Ethereum blockchain. In a conversation with Cointelegraph, Sergey Zhdanov, the CEO of cryptocurrency exchange EXMO, explained that although the exchanges will definitely become the biggest network validators, the influence will be inseparable:

“Data from Arcane Research and Nansen AI shows that Ethereum wallets with at least 32 ETH, the amount required for ETH 2.0 staking, have grown by 13% this year. The amount of these wallets are more than 120K, so the exchange wallets are taking just 1% of them.”

Alongside the crypto exchanges, custodian services provided by some institutional players also appear to be willing to offer such services. According to a PricewaterhouseCoopers report, 42% of crypto hedge funds are also involved in cryptocurrency staking.

Related: ETH Miners Will Have Little Choice Once Ethereum 2.0 Launches With PoS

Zhdanov also pointed out that many big players will likely be staking ETH by themselves as a tool to hedge the risks of their portfolio and that the popularity of ETH among other altcoins working on PoS will help reduce the centralization risk.

Speaking about the probability of centralization, Bitfinex’s Ardoino told Cointelegraph that this threat can be possible only in the early phases of the upgrade, adding: “Education on the importance of staking from own wallets will be a key factor in order to reduce centralization.”

Besides, according to CZ, staking is particularly effective in helping stabilize cryptocurrency prices, as it encourages users to make market buys when purchasing tokens, as well as rewards limit sell orders rather than market sell orders, as users continue to earn staking rewards while their order hasn’t filled yet. He added:

“Thus, during panics, users are incentivized to set limit orders to sell rather than dump on market, and during bullish periods, users are incentivized to get in faster.”

Decentralized staking pools

Staking pools or decentralized exchanges can be an alternative for those who are concerned about possible centralization and penalties incurred, for example, for going offline. As the decentralized nature implies, everything from rewards to risks is shared among the members of such pools. 

For example, decentralized staking pool Rocket Pool claims that a user deposit cannot be assigned to a “bad node” since all the pool members share the risk of nodes being slashed and, therefore, the size of the penalty. Thus, if one node fails, each pool member will lose a small number of funds. However, in the case of running a node, it’s the user who’s at risk of losing everything.

In addition to so-called socialized losses, Rocket Pool introduced its native token that represents a tokenized staking deposit and allows stakers to instantly receive a reward and withdraw it at any time. In addition, the pool does not charge fees for staking. However, in order to join the pool, users will need to have a minimum of 16 ETH — half as much of the minimum amount needed to run an individual validator node, but a lot more than what crypto exchanges would require.

What do users say?

The entry threshold to become an Ethereum validator has become the most discussed issue among users interested in staking. Many of them argue that 32 ETH is too much and noted that if the required amount was smaller, there would be many more validators on the new network.

Others said that they wouldn’t lock up 32 ETH just to secure the Ethereum network unless the staking rewards were higher than 10% per year, given that the possible profit could be negligible compared to losses in the event of a coin price drop. Although the exact staking reward size still remains unknown, many users who have revealed their plans to use third-party provider services already said they would choose the platform that offered at least 7.6% in revenue.

There are also those in the crypto community who appeared to be concerned about the threat of Ethereum centralization, rather than the cost of staking. They, however, appeared to be in the minority. Notably, a significant part of users spoke out in defense of the entry threshold of 32 ETH, comparing this amount to tens of thousands of dollars needed to own master nodes in blockchain networks, such as Dash.

While the launch date for Ethereum 2.0 is still open, users have time to decide whether they want to participate in the stake or not and how exactly they want to do it. As the examples discussed in this article show, almost any crypto user can become a validator of the new network and receive passive income regardless of their financial and technical capabilities.

Source: https://cointelegraph.com/news/ethereum-20-the-choice-between-ones-own-node-and-a-staking-service

Blockchain

Mode Adds Bitcoin to Reserves, Joining Microstrategy and Square

A UK-based fintech firm has just announced a large purchase of bitcoin using its cash reserves. Mode Global Holdings, an already bitcoin-friendly financial company, has become the first UK publicly traded firm to allocate part of its reserves to the cryptocurrency. The announcement follows those of Microstrategy and Square. As many cryptocurrency industry observers suspected, […]

The post Mode Adds Bitcoin to Reserves, Joining Microstrategy and Square appeared first on BeInCrypto.

Avatar

Published

on

A UK-based fintech firm has just announced a large purchase of bitcoin using its cash reserves. Mode Global Holdings, an already bitcoin-friendly financial company, has become the first UK publicly traded firm to allocate part of its reserves to the cryptocurrency.

The announcement follows those of Microstrategy and Square. As many cryptocurrency industry observers suspected, Microstrategy’s August revelation appears to now be inspiring others.

Currency Debasement Prompts Mode to Invest 10% of Cash Reserves

First, there was Michael Saylor’s Microstrategy. Then, came Jack Dorsey’s Square. The two companies adding BTC to their balance sheets reveal an emerging appetite for bitcoin as protection against inflation and economic crises.

Mode is the latest publicly-listed company to realize bitcoin’s importance. The UK fintech firm announced the decision via press release on Wed 21 Oct.

Mode has reportedly allocated 10% of its cash reserves on its balance sheet to bitcoin. Motivating the decision is the uncertain global macro-economic outlook in the wake of the coronavirus pandemic.

Advertisement

Continue reading below

The firm says that the bitcoin allocation is an effort to protect the assets of investors from currency debasement. It mentions record low UK interest rates of 0.1% in its justification.

The company recently completed an IPO in which it raised £7.5 million. The press release states that the decision to invest in bitcoin is an effort to “maximize the value of returns” from its IPO.

Despite its recent investment foray into bitcoin, Mode is no stranger to the digital asset. It describes itself as “the bitcoin banking app.” It also sells BTC, as well as the ability to generate interest from holdings.

Another Public Company Finds Refuge in BTC

As mentioned, Mode is by no means the first publicly-listed company to take on exposure in bitcoin. Illustrating this shift is Microstrategy CEO, Michael Saylor. In 2013, Saylor publicly dismissed bitcoin on Twitter:

After eventually doing some research into the cryptocurrency this year, Saylor completely changed his mind.

Recent appearances on various industry podcasts, along with passionate tweets like that below, have quickly elevated the CEO to legendary status in Bitcoin circles:

Whereas Bitcoin previously appeared to represent a tool for criminals, it’s now emerging as a hedge against macro uncertainty. Like Mode, both Microstrategy and Square cited their own concerns about fiat currency debasement in the wake of unprecedented coronavirus stimulus packages around the world.

The nature of these businesses lends themselves to such investments. Both Square and Mode are well-accustomed to the cryptocurrency industry, having both offered BTC exposure for some time.

In the case of Microstrategy, the board of directors is just five-strong with Michael Saylor controlling around 72% of the voting power. It, therefore, would have been much more likely for Microstrategy to invest in BTC compared to other publicly-listed companies.

Some industry observers believe that this is just the beginning of a steepening institutional adoption curve.

Source: https://beincrypto.com/mode-adds-bitcoin-to-reserves-joining-microstrategy-and-square/

Continue Reading

Blockchain

Has Bitcoin met its match with this altcoin?

The feud between Bitcoin and Ethereum is a long-standing one. ‘Feud’ isn’t exactly the right word for it. Perhaps, the communities have fought over which is the superior coin for quite some time. Howe

The post Has Bitcoin met its match with this altcoin? appeared first on AMBCrypto.

Avatar

Published

on

The feud between Bitcoin and Ethereum is a long-standing one. ‘Feud’ isn’t exactly the right word for it. Perhaps, the communities have fought over which is the superior coin for quite some time. However, comparing BTC and ETH is like comparing apples to oranges, while both may be fruits, both are different and alike in their own way.

Here are a few examples:

  1. Bitcoin is more ‘money’ than Ethereum. Bitcoin’s major focus was to be an alternative payment system to the US dollar. Hence, payment/value transfer is the main focus of Bitcoin, while with Ethereum, there are a plethora of use cases that range from smart contracts, building dapps, the world computer, etc.
  2. Bitcoin is an asset that has higher s2f  which is its main attraction/selling point to the global audience. Bitcoin can hold value [aka store of value] and is digital gold, hence, this narrative is quite alluring to the investors. As for ETH, people may find it hard to grasp Ethereum as a blockchain.

While fundamental differences are many and can be elaborate, here are comparisons of an on-chain metric that tries to show the differences between the two.

  1. Bitcoin addresses worth $1 hit a new high of 24 million, and so is the same with ETH addresses holding $1 ETH at 21.4 million.

Source: Coinmetrics

While ETH isn’t far away it still needs to catch up with BTC.

2. BTC addresses that hold less than $10 is at a whopping 16.45 million whereas, for ETH, this number is at 6.51 million. The gap is huge but is not out of the purview of Ethereum.

Source: Coinmetrics

Conclusion

This is both good and bad, depending on how one views it.

On the bright side, Bitcoin has had the 1st mover advantage, however, ETH has almost caught up with bitcoin even though it was launched in 2015, 2016. Considering ETH’s much-awaited and much-delayed ETH 2.0, these numbers could easily be overpassed, should ETH successfully move to ETH 2.0.

To conclude, comparing these coins is counter-cyclical. Bitcoin’s goal is much different than what Ethereum intends to do, so comparing them would be a wasted effort. While the two, as mentioned, are different from each other, trying to build a gateway between the two would benefit both the ecosystem better.

Source: https://eng.ambcrypto.com/bitcoin-and-ethereum-is-one-better-than-the-other

Continue Reading

Blockchain

Yearn Finance Adds GUSD Vaults and Updated Keep3r Network Details

Yearn Finance, one of the leading Defi protocols has recently made an addition on Gemini Dollar (GUSD) vaults to its platform.

Avatar

Published

on

Rate this post

Yearn Finance, one of the leading DeFi protocols, has recently made an addition on Gemini Dollar (GUSD) vaults to its platform. The firm has not yet revealed any strategies or potential earnings from this new addition to the platform. It is recently reported that the other four stablecoin pools on the platform have seen some yearly growth.

This new addition by Yearn Finance is appreciated by Cameron Winklevoss, founder of Gemini exchange. He seems to be quite delighted by this move and believed that the future belongs to the DeFi sector.

Yearn Finance Founder’s Github Updated With More Details

It is also reported that Github of the founder of Yearn Finance recently got updated with the additional details on the Keep3r network. It is believed that this is going to act as a smart contract job platform for all the projects that require some extra operations. Here the job is used for smart contracts that require an entity to perform actions. It is also mentioned that the network will be powered by KPR tokens and these tokens are issued as rewards against job completion. 

Daniel Lehnberg Explored How Protocol Should be Considered 

There has been a lot of discussion regarding this protocol by the Yearn Finance and Daniel Lehnberg has also explored how this protocol needs to be considered.  In the end, it is specified that it is actually not even a company and is not having any shareholders. It indicates that this protocol is not in a good position at present. It is reported that Yearn Finance has again slumped by 14% this week and is currently around the $13,000 mark. This position is still seen as a loss because it is 63% less the all-time weekly high of YFI which was around $37,000 back in September.

READ  BCH Proponent Releases Stamp Chat, Prototype Of Layer-2 On Bitcoin Cash

#Cameron Winklevoss #Daniel Lehnberg #GitHub #GUSD vaults #Keep3r network #KPR tokens #yearn.finance

Source: https://www.cryptoknowmics.com/news/yearn-finance-adds-gusd-vaults-and-updated-keep3r-network-details

Continue Reading
Esports2 hours ago

cogu joins MIBR as manager and coach

Energy2 hours ago

Strategic Resources Files Mustavaara Technical Report

Energy2 hours ago

Ur-Energy Announces Extension of State Bond Loan and Provides Update

Energy2 hours ago

Pettit Marine Paint Develops the Most Effective Anti-fouling Paint to Hit the Market in Many Years – ODYSSEY® TRITON

Energy3 hours ago

Core Lab Reports Third Quarter 2020 Results From Continuing Operations:

Energy3 hours ago

A Difference-Making Disinfectant

Automotive4 hours ago

How Car Tires Are Manufactured

Medical Devices4 hours ago

5 Real World Applications of the Doppler Effect

Big Data4 hours ago

Join Hands with Instagram’s New Algorithm to Boost Your Business’s User Engagement

Energy6 hours ago

BioMicrobics Acclaimed by Frost & Sullivan for Its Continuous Innovation-led Growth in the Water and Wastewater Treatment Market

Energy7 hours ago

SME Education Foundation Seeks Industry Involvement for Unadilla Valley High School Initiative to Create STEM Opportunities for Students

Energy7 hours ago

Verisem Acquires State-of-the-Art Vegetable Seed Processing Facility, Further Enhancing Capabilities

Energy7 hours ago

Global Synthetic and Bio Based Polypropylene Market 2020-2026 Growing Demand in the Automotive Industries

AR/VR7 hours ago

AI-Driven Dynamic Filmmaking is the Future

Energy7 hours ago

Growing Concerns around Global Warming Are Set to Drive Hypercar Market Forward: TMR

AR/VR9 hours ago

Angry Birds VR and Acron: Attack of the Squirrels Gear up for Halloween

Crowdfunding9 hours ago

This Is a $103 Billion Profit Opportunity

Energy9 hours ago

Power Plant Boiler Market by Type, Capacity, Technology, Fuel Type, and Region – Global Forecast to 2025

Energy9 hours ago

Rising Phoenix Royalties Announces Second Yoakum County, Permian Basin, Oil and Natural Gas Royalty Acquisition

Energy9 hours ago

Chem-Dry Grows Amid Pandemic with Signed Agreements to Open 64 New Franchises Across the Nation

Energy10 hours ago

Key Trends and Recent Innovations in Powder Bed Fusion, IDTechEx Identifies

Blockchain News10 hours ago

Bitcoin Breaks $12K Resistance and Aims for $14K as BTC Rallies Higher in the Expense of Altcoins

Energy10 hours ago

Pasternack Now Offers a Broad Selection of Field Replaceable Connectors Available for Same-Day Shipment

AR/VR10 hours ago

Star Wars: Tales from the Galaxy’s Edge Gameplay Trailer Drops With November Date for Oculus Quest

Crunchbase11 hours ago

The Briefing: RVShare raises over $100M, Google disputes charges, and more

Blockchain11 hours ago

Mode Adds Bitcoin to Reserves, Joining Microstrategy and Square

Blockchain11 hours ago

Has Bitcoin met its match with this altcoin?

Crunchbase11 hours ago

Syte Sees $30M Series C For Product Discovery

Blockchain News11 hours ago

What could a Democrat Sweep in US Elections mean for Bitcoin?

Blockchain11 hours ago

Yearn Finance Adds GUSD Vaults and Updated Keep3r Network Details

Blockchain11 hours ago

B2BX Exchange Announces B2BX Token Buyback

Blockchain11 hours ago

Coinend: 1, 2, 3 Take off -New Gamified Crypto Prediction Platform!

Coinpedia11 hours ago

GenTech Proudly Secures Deal with TruLife Distribution to Drive Growth in SINFIT Digital Sales

Blockchain11 hours ago

Coinend: 1, 2, 3, Take off – New gamified crypto prediction platform!

Blockchain12 hours ago

PayPal to allow transactions in Bitcoin, Ethereum etc. from 2021

Blockchain News12 hours ago

Ripple CTO Assesses XRP as a Bridge Cryptocurrency Between CBDCs, Stablecoins, and Fiat

Big Data12 hours ago

Top 10 Big Data trends of 2020

Fintech12 hours ago

5 Things to Know Before Investing in Bitcoin

Crunchbase12 hours ago

Intellimize Closes $12M Round Of New Funding

Crunchbase12 hours ago

Fintech Startups Broke Apart Financial Services. Now The Sector Is Rebundling

Trending