What is Ethereum Proof of Stake (PoS)?

Proof of Stake (PoS) is an alternative method to Proof of Work for validating blocks. In a Proof of Stake system, blocks aren’t mined, as such, but minted (sometimes referred to as forged). Instead of miners competing with hash power, a node (or validator) is periodically chosen at random to validate a candidate block. If done correctly, they will receive all of that block’s transaction fees and, depending on the protocol, possibly a block reward.

Since there’s no mining involved, Proof of Stake is regarded as less harmful to the environment. Validators don’t consume nearly as much energy as miners, and can instead mint blocks on consumer-grade hardware.

Ethereum is scheduled to transition from PoW to PoS as a part of Ethereum 2.0, with an upgrade known as Casper. Though an exact date has yet to be formalized, the first iteration will likely be launched in 2020.

What is Ethereum staking?

In Proof of Work protocols, the security of the network is assured by miners. The miners won’t cheat, as it would waste electricity and cause them to lose out on potential rewards. In Proof of Stake, there is no such game theory, and different cryptoeconomic measures are in place to ensure network security.

Instead of the risk of wastage, what prevents dishonest conduct is the risk of losing funds. Validators must put forward a stake (meaning a token holding) to be eligible for validation. This is a set amount of ether that’s lost if the node attempts to cheat, or is slowly depleted if the node is unresponsive or offline. However, if the validator runs additional nodes, they stand to gain more rewards.

How much ETH do I need to stake on Ethereum?

The estimated minimum stake for Ethereum is 32 ETH per validator. This is set so high to render the cost of attempting a 51% attack extremely high.

How much ETH can I earn by staking on Ethereum?

This isn’t a simple question to answer. This is based on, of course, your stake, but also on the total amount of ETH staked on the network and the inflation rate. As a very rough estimate, the current calculations project about 6% yearly returns. Keep in mind that this is just an estimation, and might change in the future.

How long is my ETH locked up when staking?

There’s going to be a queue for withdrawing your ETH from your validator. If there’s no queue, the minimum withdrawal time is 18 hours, but it’s dynamically adjusted based on how many validators are withdrawing at a given time.

Is there a risk to staking ETH?

Since you’re a validator on the network that’s responsible for maintaining network security, there are some risks to consider. If your validator node goes offline for an extended period, you may lose a considerable portion of your deposit. Also, if your deposit drops below 16 ETH at any point, you’ll be removed from the validator set.

It’s also worth considering a more systemic risk factor. Proof of Stake hasn’t been implemented on such a scale before, so we can’t be entirely sure that it won’t fail somehow. Software is always going to have bugs and vulnerabilities, and this can have a devastating effect – especially when billions of dollars of value are at stake.