With Ethereum 2.0 mainnet beacon chain launch just around the corner, Neukind has announced an innovative solution for managing validator nodes: Node as a Service.
In case you’re curious about ETH 2.0, the economics and risk factors of staking, or just want to learn how to participate in this exciting launch, we’ve prepared some information you should find useful.
Countdown to Ethereum 2.0 Staking: make sure you’re prepared!
Why stake ETH?
This article explains how Ethereum 2.0 staking works and how by offering Neukind Node-as-a-service, Neukind is able to provide a safe and easy environment for clients to capitalise on the Ethereum 2.0 trend.
Like many Proof of Stake (PoS) cryptocurrency models, in Ethereum 2.0 the staking rewards are divided equally amongst the validators: nodes that participate in attesting to the validity of new blocks in order to achieve consensus. For Ethereum 2.0, this reward is some 430 ETH per day. As the network of validators grows in size, the network becomes more secure, but the expected reward for any given validator becomes smaller. Once 16384 validators become active on the Ethereum 2.0 mainnet beacon chain via the deposit contract, the beacon genesis will commence after a short delay of 7 days.
Part One: Pros
Staking Reward
The primary incentive to stake in the ETH 2.0 ecosystem will be the staking reward. If only 16384 validators are active on the network the APR will be 21.6%. Although for many risk takers 21.6% of APY doesn’t seem like much, however 21.6% on top of a volatile digital asset will have a nice return when the price appreciates.
Network Security and Increased Participation
Most Proof of Work blockchains come with a high barrier to entry: you need to find reasonably priced GPUs and/or ASIC mining hardware, and host them in a place where the expected mining reward outpaces your electricity overhead (an increasingly difficult task). Not only is this inefficient in terms of energy use (an externality that has been widely criticized), but the low probability of mining a block on one’s own in a popular network like Bitcoin incentivizes the formation of centralized mining pools, which increases the likelihood of a so-called 51% attack.
By contrast, Ethereum 2.0 requires no specialized hardware to participate in the network as a validator, and cooperating with other independent validators does not increase your expected reward. Simply put, PoS significantly lowers the barrier to entry for blockchain, and encourages network decentralization which in turn makes Ethereum more secure.
Part Two: The technicals
Staking Incentives and Risks
The minimum requirement to become a validator in the Ethereum 2.0 network is 32 ETH. This ETH will be held in the deposit contract until the current Ethereum mainnet is docked with the Ethereum 2.0 beacon chain. In the meantime, the 32 ETH stake will continue to accrue staking rewards as long as the validator is active and successfully completing proposals and attestations in accordance with network rules. Inactive validators and validators who act maliciously will be subject to a reduction of their stake via penalties, slashing, and forced exits. To get a better understanding of the potential reward, please use the eth2 calculator graciously provided by StakeETH.
The Danger of Centralized Cloud Platforms
Because the staking reward is contingent on the health and uptime of the validator, it is important to choose a node provider that offers a strong guarantee of reliability. Neukind has a proven track record in the Proof of Stake space as a dedicated hosting provider for Horizen (ZEN) staking nodes. When you host staking nodes on cloud services such as AWS, you may be taking on more platform risk than you realize — unexpected cloud outages can and do happen, threatening not only your personal stake but the health of the network at large. The reliance of ETH Dapps on AWS and other centralized cloud services has been a subject of admonishment from crypto advocates like Anthony Pompliano.
Barriers to Entry
For many crypto investors, Ethereum 2.0 represents a lucrative opportunity to invest and strengthen the Ethereum ecosystem. However, the required knowledge of technology, and the burden of node maintenance, may present a significant obstacle. Joining a pool will also be exposed to risk of losing the fund. By using Neukind’s Node as a Service offering, you can get started staking ETH right away while knowing that your staked funds will be secure. Neukind offers a fully-managed, non-custodial solution for ETH staking where you share only the validator keys, while retaining full control of the withdrawal keys. Therefore, your stake will never be withdrawn without your consent.
Start Staking Today on Neukind
Start staking on Neukind’s Node as a Service platform: the easiest and safest way to stake your Ethereum.
Neukind has worked tirelessly for the past 3 years to provide a safe and easy product for the wider blockchain community. We will continue to add support for new chains and offer more products to suit our customers’ needs.
Neukind is excited for the Ethereum 2.0 genesis and many more blockchains to come. More dedicated node hosting services will be added to our platform soon!
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