Ethereum, the largest blockchain network with smart contract functionality, is transitioning from a Proof of Work (PoW) to Proof of Stake (PoS) consensus mechanism. Once complete, all of Ethereum’s network value, including ERC-20 tokens and NFTs will be secured via PoS.
Ethereum and ETH 2 (Beacon Chain) are currently separate blockchains. End users of Ethereum applications like Uniswap and Opensea are still interacting with the Proof of Work based Ethereum mainnet. Eventually, the state of this chain will merge with the Proof of Stake based Beacon Chain and become a single shard of a smart contract enabled PoS based Ethereum.
Where We Are
There are currently 2 live and somewhat separate Ethereum chains, Ethereum mainnet and the Beacon Chain. ETH token holders who would like to stake ETH can deposit their ETH into a deposit contract, which acts as a one way bridge between Ethereum mainnet and the Beacon Chain. Once this is done, ETH deposits cannot be withdrawn or transferred until after the merge is complete.
At this time, ETH stakers are only earning rewards in the form of network inflation. This is because all transactions are still being settled on the PoW Ethereum mainnet.
The Merge
The actual technical implementation of the merge is still very much in discussion. That said, the mechanism that is ultimately chosen will focus on creating a seamless transition from an end-user and application developer perspective.
When the merge takes place, the Ethereum mainnet chain will most likely halt for over an hour. Historically, this has rarely happened before on Ethereum. While the chain is halted, the state of the chain will be merged onto the Beacon Chain. This means that all Ethereum mainnet accounts, account balances, smart contracts, ERC-20 tokens, etc. will move onto the Beacon Chain.
Once complete, end users will be interacting with a smart contract enabled PoS based Ethereum mainnet with all of the functionality they are used to.
So, When Can I Withdraw My Staked ETH?
As of writing this, there are over $500B worth of assets secured and stored on the Ethereum network. One of the key reasons why blockchains like Ethereum are so attractive is because these protocols give token holders the ability to transfer, trade, and access their assets 24/7 without an intermediary. The chain halt will remove that ability.
As mentioned before, the merge is designed to be simple for end users and take the least amount of time possible. One way to shorten that time is by delaying certain new features, like the ability to withdraw staked ETH.
Future
The Ethereum merge is expected to take place in Q2 2022. Once complete, Ethereum will be secured by validators like Figment, and ETH token holders. The merge from Proof of Work to Proof of Stake will make Ethereum 99% more energy efficient than its PoW predecessor.
After the merge, stakers will also earn transaction fees generated from the network, which will raise the APY when staking ETH. Conservative and optomistic staking APY estimates from Ethereum 2 researcher, Justin Drake, range between 7.2% to 68.7% respectively.
It is important to note that the merge from PoW to PoS does not solve the scalability issues and high gas fees currently on Ethereum. This is solved by sharding, which will be implemented at a later date.
Sharding will partition the Ethereum blockchain into “shards” which will reduce network congestion and allow for more transactions per second. Eventually, the current Beacon Chain will become a single shard of the Ethereum mainnet. You can learn more about sharding here.
So, Can I Stake ETH with Figment?
Yes! We are currently offering a white glove ETH staking solution for any institution or large individual token holder looking to stake more than 320 ETH.
Quick Facts:
- Whiteglove solution catered to your current tech stack and security needs.
- Mix of bare metal and cloud infrastructure optimized for safety.
- Custom SLAs: Slashing and Missed Rewards coverage.
- Rewards reporting and custom portfolio dashboards.
- 24/7 private support channels.
- Lighthouse client provides unique safety coverage and excellent performance.
- Secure key handling.
- Validators can be provisioned in specific geographic locations based on preference.
- Automated validator provisioning.
- APIs for customer self-service.
- Governance analysis and actions aligned with customer interest and network longevity.
- Fully set up and staking within 5 business days.
We also support Lido, a liquid staking solution that allows ETH holders to stake less than the 32 ETH required to spin up a validator on the Beacon Chain.
Contact us at sales@figment.io for more information on staking ETH with Figment.
