As we write, the ETH2 deposit contract has received just 18.94% of the funds it needs to go live. This makes a delayed launch to Ethereum 2.0 all but certain, with less than a week to go till the staking deadline.
To trigger genesis at this time, there must be at least 16384 32-ETH validator deposits 7 days prior to December 1. If not, genesis will be triggered 7 days after this threshold has been met (whenever that may be).The coordinator of ETH2, Danny Ryan, posted this following the publication of the deposit contract’s address.
Let’s understand staking
ETH2 plans to introduce the concept of staking to the Ethereum ecosystem.
Imagine you work at a pizza place, and get a call for home delivery.
You could play it safe and make 15 pizzas, give one to each delivery driver and then tell them only the first person to reach gets paid. This way, you’re guaranteed to have at least one pizza reach its destination, right?
This is how the old system, called Proof-of-Work, verified transactions. The process of mining involves calculating a massive number, which can only be done with high-end processing power. One way of understanding it is to imagine paying someone a salary for ensuring your accounts books are updated. The salary is the Bitcoin rewards, and the delivery person is the miner.
As you can tell, it’s not the most energy efficient. It also isn’t particularly fair – what if one delivery driver has a car, while the others only have cycles?
Staking offers a more efficient and more equitable solution.
Instead of having everyone compete, now you choose your delivery driver at random. If they make the delivery – great! They’ve earned their reward. If they don’t, they forfeit the payment. Repeated failures mean they’re removed from the team of drivers.
Why aren’t investors staking on ETH2?
The short answer is, the Ethereum 2.0 network needs delivery drivers, called validators, to deposit ETH and make the new network operational.
Each validator must deposit 32 ETH to join the pool of validators. You’re free to stake more, but must set up another validator to do so. This means that the more ETH you deposit, the more likely you are to be selected to process a transaction and earn its rewards.
This sounds great, but there are two drawbacks:
- First, 32 ETH is a LOT of money! It’s more than 11 lakhs today, and will continue to rise.
- Second, once you make the deposit – your ETH is locked into the contract until the implementation of Phase 1 and Phase 2, which could take years to complete.