ETH2.0 is on the verge of being launched. Here are some things you should know in advance

This means that the ETH2.0 Phase0 and Staking that many people have been looking forward to will be officially launched soon!

According to documents released by Github, Ethereum 2.0 will be officially released on December 1, and the genesis time is scheduled for January 3, 2021, the 12th anniversary of the birth of the Bitcoin network.

Of course, there is a very important prerequisite for the release of 2.0 - the Staking address released yesterday must have enough ETH locked in it. How much ETH is required? 524,288. In other words, we have to find ETH owners with 200 million US dollars to lock up their positions here before 2.0 can be officially launched.

How many ETH are in the contract at the time of writing? 16,293, 3.1% complete.

In the next month, you will definitely see this number continue to grow, and only God knows how high it will eventually reach. Regardless of whether you plan to participate in this "largest staking feast in the history of the circle" or not, I think you should at least know the following information.

01Stage 0A journey of a thousand miles begins with a single step

ETH's Phase 0 means that the beacon chain is about to go online.

Phase 0, or the beacon chain, is very important in ETH2.0, but probably not as important as you think.

Simply put, many people think that with the launch of ETH2.0, ETH will be awesome, the speed and performance will improve, DeFi will be unblocked, and blockchain will be accessible to every household... They are overthinking. It has nothing to do with these things. Ethereum TPS will still be 15. It will be slow when it is time to slow down and unblocked when it is time to unblock. Everything will be normal.

What is the significance of the beacon chain going online? The most important thing is the Staking gateway released yesterday, which means that ETH’s “PoS mining” is about to begin.

The other function is to coordinate the status and communication of shards like a lighthouse or beacon, which is why it is called the "beacon chain". Of course, this function will only come in handy in Phase 1.

Regarding the beacon chain and Phase 0, Baihua has discussed it in detail before. Those who are interested can go back and read "ETH2.0 is progressing smoothly: Ethereum is going further and further, but the "Ethereum killers" are silent". I will not elaborate on it in this article.

A journey of a thousand miles begins with a single step. The curtain has been raised on ETH2.0, and Phase 0 and the Beacon Chain are milestone events.

02 Impact on ETH

The impact on ETH is mainly on mining and prices, which can be specifically viewed from three aspects: PoW miners, PoS miners, and ETH itself.

PoW miners: Since the DAG file containing the encrypted information of all blocks will exceed 4G in December this year, this also means that all 4G video memory graphics card mining machines will be eliminated next month. For miners with video memory>=8G, in theory, they can enjoy the increase in income after the overall network computing power decreases for a period of time.

Of course, ETH will eventually transition completely from the PoW+PoS stage to PoS, and all PoW miners will be "laid off" at that time. It’s just that no one can predict the timing, but it is highly likely that this day will not come within 2 or 3 years.

PoS miners: All validators who stake 32 ETH can be counted as ETH's "PoS miners". To meet the staking requirement of 520,000 ETH, 16,000 "PoS" miners are needed to participate.

How many addresses on the ETH network currently have more than 32 ETH? 13,000.

What?! This is not enough! Don’t worry, we will talk about this issue later when we talk about Staking.

From the perspective of revenue, the PoS revenue graph is as follows:

When the total number of ETH staked on the entire network reaches 520,000, what will be the annualized return of these miners? 21.6%!

For those who are optimistic about Ethereum in the long term, this is definitely a considerable annual income, because in addition to the 21.6% increase in the amount of ETH in your hands, you also did not miss out on the increase in ETH prices.

According to the curve, when the total number of ETH staked in the entire network reaches 10 million, the annualized rate can still be maintained at around 5%, which is still an income that can outperform bank deposits and various types of inflation. Of course, the premise is that you firmly believe that ETH can at least remain above the price of US$400 in a few years.

ETH price: From the perspective of supply and demand, since a large amount of ETH will be locked up in Staking, theoretically, there should be a large amount of ETH purchase demand on the demand side. Also, since ETH2.0 Staking is a one-way ticket that only allows you to enter but not exit, the ETH you staked cannot be withdrawn within 2 years, so the supply side should reduce a lot of selling pressure.

It seems that it will have a significant boost to the price of ETH, but if you look into it carefully, it may not be that optimistic.

The reasons are as follows. On the demand side, ETH has a huge number of "believers", that is, coin hoarders. According to data from the middle of this year, 77.7% of the ETH not locked in smart contracts has not been transferred for six months, 57.6% has not been transferred for a year, and 31.6% has not been transferred for two years. It is conceivable that this group of people will definitely be the main force of Staking, and the ETH in their hands has been hoarded for a long time, so the demand for ETH purchases in the market may not be that great.

On the supply side, although the ETH entering Staking cannot create selling pressure on the spot market, with the various Staking methods introduced below, many of the staked ETH will continue to circulate in the market in the form of income bonds, so the actual "locked amount" is actually much less than you think.

03How to participate? Know the risks, various forms

As the largest staking event in the history of cryptocurrency, there are bound to be many ways to participate in ETH2.0 staking. As far as I know and can think of, I will list them here:

1. The most hardcore: build it yourself

This is undoubtedly for professional players. You need to have a computer like this (official recommended configuration):

Operating system: 64-bit Linux, Mac OS X, Windows;

Processor: Intel Core i7-4770 or AMD FX-8310 (or higher);

Memory: 8GB RAM;

Storage: 100GB available solid-state drive (SSD);

Internet: Broadband Internet (10 Mbps);

Power supply: Uninterruptible power supply (UPS).

You need to know how to install and run an ETH1.0 node, know how to install and run an ETH2.0 node, be proficient in keys, mnemonics, compilers, etc. You need to make sure your node is always online, because there will be a margin penalty if it is continuously offline.

Of course the most important thing is that you have to have 32 ETH.

2. The most worry-free: trading platform

I remember watching an interview with the head of Huobi Mining Pool before, in which he said that "Huobi will launch ETH2.0 related products and services as soon as possible."

It is conceivable that first- and second-tier trading platforms with strong technical strength will definitely focus on this business. After all, imagine that 30 million ETH will be staked at that time. According to the curve, the annual rate is about 3.3%. 1 million ETH per year, at the current price of 400 US dollars, is 400 million US dollars. Assuming that most of the staking is done through third-party service providers such as trading platforms, and the trading platform charges a 25% service fee, that is a profit of nearly 100 million US dollars a year, a big piece of cake, I believe that the trading platform will not let it go.

The reason why the trading platform is worry-free, in addition to the fact that most players are accustomed to using CEX, another important factor is the trading platform's ETH2.0 Staking service. It is highly likely that you do not need to have 32 ETH. After all, it is CEX. The trading platform can help everyone "group orders" and the profits can be distributed proportionally.

3. The most blockchain: wallets, third-party service providers, staking projects...

Hardcore players believe that few are willing to worry about this, and they also have to worry about offline penalties such as Internet outages at home. The trading platform is too unblocked. Relatively speaking, the most blockchain methods are the following three methods.

Wallet: I believe that many wallets will provide staking services similar to trading platforms. Using a wallet to stake is just like trading with DEX such as Uniswap. The private key is still in your hands, so it is more "blockchain".

Third party: For example, Consensys' Codefi platform has clearly released a page that supports Eth2.0 staking, but it has not yet been launched. When the time comes, you can directly use your wallet to participate on the website.

Staking projects: Ankr, BLOX, and Rocket Protocol are the most popular projects that provide non-custodial "one-click staking" and "group order pool" services to meet the needs of users who do not have 32 ETH. Ankr and Rocket Protocol also provide bonded ETH to ensure that the staked ETH can still circulate in the market, which eliminates the fear of most players about the loss of liquidity of the staked ETH.

04 Final words

There is no doubt that in the next 10 years, blockchain, as the infrastructure of Web3.0, will play an increasingly important role.

BTC has already gone further and further on the road of digital gold and it is impossible for it to become the underlying public chain supporting Web3.0. This important task has been handed over to public chains such as ETH.

Who will take on this important task by then? Putting aside ETH’s current huge first-mover advantage, the difference in the following core concepts may be the deciding factor by then, that is, whether the public chain as the infrastructure of Web3.0 can run on a Raspberry Pi (simple home or microcomputer).

Among the current public chains with high market capitalization and good ecosystems: ETH, DOT, Dfinity and BSV, they can be said to be ranked from strong to weak in this concept. ETH2.0 will have tens of thousands or even hundreds of thousands of ordinary nodes in the future. DOT's nodes may be around hundreds to thousands, and the hardware requirements are much higher than ETH. Dfinity requires professional customized servers, no hard disk, and massive memory. The concept of BSV is to use data center-level hardware + infrastructure to make nodes with unlimited blocks.

Is this concept right or wrong? It is hard to say at present. In essence, they all have decentralization, or more accurately, "permissionless" - the core attribute of public chains with no permission entry threshold. However, the pursuit of hardware undoubtedly increases the threshold for ordinary people to participate in block production.

Should the infrastructure of the future Web3.0 be decentralized to the level where a Raspberry Pi can run it, or should we just stick to Permissionless and leave professional matters to professional hardware? This is undoubtedly the most interesting point in the public chain competition in the next few years. In the end, we still need the market to make the right choice for us.