Ethereum has been one of the most popular cryptocurrencies and has managed to establish a place at the second spot with its market capitalization of $39.85 billion. Ethereum inches closer to Proof of Stake [PoS] in the Serenity upgrade and will be identified as Ethereum 2.0. However, there has been some lack of clarity among the users regarding staking.
Since PoS required validators to stake at least 32 ETH to qualify, the rewards in the long-term would have to be attractive enough to keep validators in the game to maintain the network’s security. As per Delphi Digital’s report, since PoS isn’t put to a large-scale use yet, it remains to be seen what the right level of issuance will be. There was a significant risk, given the uncertainty around the length of the ETH lockup period, during which the staking rewards will not be compounded.
Meanwhile, decentralized finance [DeFi] and yield farming have been growing. It was important for the developers to pay closer attention to the opportunity cost of staking the digital asset. DeFi’s growth has been puzzling users over Ethereum’s materiality of staking. However, researchers believe Ethereum being the second-largest asset has been underestimated and with PoS it could enable funds to deploy more capital at scale.
Even though the developers and researchers along with the users are moving towards ETH 2.0, some things will be cleared up only after the early stages of launch like rewards. Data suggested the medium-term rewards for staking are expected to be around 5.72%.
In the meantime, Ethereum blockchain has been witnessing higher fees for transactions over the past few weeks. Even though many speculated that DeFi has been driving the high fees, Delphi Digital’s report believed it was the dApss built on the Ethereum network that has been driving fees, leading to more scarce bandwidth.