Ethereum (ETH) Ready for Evolution with Proof-of-Stake Testnet
The mechanism to move away from mining has taken longer than expected, but now Ethereum prepares to adopt staking soon after a spell on the testnet.
For years, the Ethereum network was expecting a move to the more eco-friendly and less energy intensive approach to block production, consensus and security. But Ethereum reached that goal only gradually, by shrinking the block reward via a series of upgrades over the years.
“This is a non-trivial, critical step to take this technology to the next level, and we need you to be a part of it,” said Preston Van Loon, co-founder of Prysmatic Labs.
The testnet is live and public, not just a simulation, and users can start staking with specially provided coins, starting at 3.4 ETH. Staking starts through depositing funds in a smart contract, and users are encouraged to be online as much as possible. Staking without availability on the network will lead to penalties.
The testnet, however, will only accept a limited number of validators, as the Prysmatic Labs team admitted there is not enough capacity for hundreds of validators.
Ethereum staking will probably give relatively low rewards, based on initial information. But Ethereum’s co-founder Vitalik Buterin has proposed an increase in staking rewards, potentially turning the activity into a profitable business.
Staking will require ownership of ETH tokens, and this may boost the market price. Currently, ETH hovers below the $200 threshold, trading at $170.71. The asset is among the most actively traded, and locking in the supply for staking may boost the markets.
The Ethereum network will also involve sharding as a scaling solution, since running all activities on one blockchain creates a bloated history, which is currently held only by the BlockCypher service. Sharding will allow for smart contract verification and only occasional records on a “beacon blockchain”.