Eth2 & Staking Ecosystem Report

Ethereums’ transition to Proof-of-Stake has been in the bushes for quite some time now. Like most of you, we are eagerly waiting for this to happen. We are keen on exploring the new staking ecosystem that will emerge once Ethereum morphs into Ethereum 2.0 first hand.

In the meantime, Mara Schmiedt, Georgia Rakusen, and Collin Myers from ConsenSys Activate did a great job of outlining this ecosystem and conducted an in-depth, quantitative study with 287 participants already owning Ether. They published the findings of their research in the “Ethereum 2.0 Staking Ecosystem Report”.

In this post, we would like to bring you up to speed in terms of Ethereum 2.0 and share the reports’ main insights without going into too much detail.

Let’s start with a little bit of background.

What is Ethereum 2.0?

Proof-of-Stake (PoS)

Sharding

Sharding is a major part of Eth2 and a complex topic in itself. This video by Blockgeeks does an excellent job of explaining and a good starting point in case you want to learn more:

When will Ethereum 2.0 launch?

Ethereum 2.0 Launch Phases — taken from the Ethereum 2.0 Staking Ecosystem Report by ConsenSys

Phase 0 | Beacon Chain

Phase 1 | Shard Chains

During the first two phases, Eth2 can “only” be used for staking as well as sending tokens. No smart contracts are enabled on Eth2 in phase 0 and phase 1.

Phase 2 | Execution Engine

Staking in Ethereum 2.0

It is important to note that during the transition (phase 0 & 1), you will have two Ethereums running in parallel, namely Eth1 and Eth2. There will be a one-way, non-reversible bridge between the two. Thus, you cannot convert tokens back from Eth2 to Eth1.

The decentralization of the network is fostered by the fact that consumer hardware is prospectively sufficient in order to participate in staking. Hence, ETH holders have two options if they want to participate:

  1. Run their own validator node
  2. Use the services of a staking provider

And this is where we will jump into the ConsenSys study’s main findings:

Of the 287 participants, around 65% plan to stake on Eth2. Roughly half of those want to run their own node, whereas the other half plans on using the services of a staking provider. The remainder is either undecided, not going to stake or hasn’t answered the question.

Eth2 Staking Preferences taken from the Ethereum 2.0 Staking Ecosystem Report by ConsenSys
Eth2 Staking Preferences taken from the Ethereum 2.0 Staking Ecosystem Report by ConsenSys

The study states that the majority of the respondents (63,2%) hold 32 or more ETH. It was interesting to read that almost half of the respondents (46%) manage their funds with a hardware wallet. Of those planning to use a staking provider, roughly a third (30,2%) manage their funds via a centralized exchange.

The participants that plan on staking, either on their own or via a staking provider, stated that they plan on staking roughly half of their Eth holdings.

It is no surprise that when asked about what staking providers the respondents knew, big exchanges such as Coinbase or Binance scored the highest. Nevertheless, we are flattered to also be in the list.

Known Staking Providers, taken from the Ethereum 2.0 Staking Ecosystem Report by ConsenSys

We want to thank ConsenSys Activate and especially Mara Schmiedt, Georgia Rakusen and Collin Myers for their work and highly encourage everyone to check out the full report here:

Having closely followed Ethereum for the last several years, we couldn’t be more excited about the transition to Eth2. We are eager to provide our staking services to any ETH holder and are more than happy to hear your thoughts, feedback, wishes and concerns about staking in Ethereum 2.0!

Since this was only a quick intro to Eth2 and there is so much more to unravel, we provide you with the sources for this post in case you want to dig a little bit deeper yourself:

https://consensys.net/knowledge-base/ethereum-2/

https://boxmining.com/ethereum-2/

https://blog.bitmex.com/ethereum-2-0/