Ethereum

Layer 1 Protocol, Ethereum Ecosystem

Overview

Ethereum is a programmable blockchain - it provides basic functionality such as sending or receiving Ether (the Ethereum native token), but also allows for the creation of smart contracts - programs built on Ethereum which users can interact with (some examples).
Rather than a distributed ledger, Ethereum can be thought of as a distributed state machine, where the state is a large data structure that holds accounts, balances and a machine state.

Staking Information

APY
~4.8%
Total Supply
Inflationary
Compounding
No compounding
Compounding Frequency
N/A
Reward Distribution Period (Payout Frequency)
Distributed every epoch, but locked until phase 2
Unbonding Period
1 Day to 3 Weeks
Slashing Penalty
Slashing on Double-signing and Surround votes
Burn Mechanism
Base fee of every transaction is burned
Validator Self-Bond Requirement
32 ETH
Inflation
~0.54%
Recommended Wallet
Ledger

Staking Guide

Ready to Stake?

ETH staking is in denominations of 32 ETH. If you’re ready to stake, the easiest way is to contact us: [email protected]
If you are using a third-party custody solution or would like an introduction, contact [email protected]
You will need a Ledger Nano X device (not Nano S).
  1. 1.
    Connect your Ledger Nano X to Ledger Live and open the Ledger Manager.
  2. 2.
    Ensure your firmware is updated: a) Locate the blue banner at the top of the Ledger Manager page and use the link to download the latest Nano X firmware b) Ledger Live will then automatically download the latest Ethereum app (v1.6.0). Ignore the Eth2 Ledger app.
  3. 3.
    Figment's dashboard will now retrieve your Eth2 withdrawal key from your Ledger Nano X during the deposit process.
Please reach out to [email protected] if you plan to stake more than 1 Million USD in ETH tokens.

Governance Overview

Governance on the Ethereum network is off-chain - participants do not need to own a token, such as Ether, to create a proposal (known as Ethereum Improvement Proposals, or EIPs) or argue for or against a proposal (see here). Ultimately, whether a proposal is incorporated into an update is decided by the Core Developers, whether it is adopted is ultimately up to the miners (post-merge this will be up to the validators).

Ecosystem Overview

Ethereum is one of the best known networks in the cryptocurrency space and boasts and very large developer community and countless protocols building on its protocol. Additionally many networks in the PoS (Proof-of-Stake) space are EVM-compatible (Ethereum Virtual Machine) or are working to become EVM-compatible as it’s highly beneficial to connect to the Ethereum ecosystem for the experience, developer community and capital that it brings. Notable networks include Avalance, BNB Chain, Celo and Evmos.
With Ethereum experiencing scalability issues many projects have started addressing these issues directly as Layer 2 scaling solutions built on top of Ethereum (Arbitrum, Optimism, zkSync). Many DeFi (Decentralized Finance) networks are also utilizing Ethereum. Lido (making staked assets liquid) and Rocketpool.

FAQs

What is Proof-of-Stake Ethereum?
The Ethereum network is undergoing a series of upgrades to help make it more scalable, secure and sustainable, these upgrades were previously referred to as Ethereum 2. A few of these upgrades, culminating in ‘The Merge’, represent Ethereum’s transition from a proof-of-work (POW) network to a proof-of-stake (POS) network.
The Beacon Chain, launched in December 2020, represents an upgrade of the consensus layer of Ethereum to POS. The Merge, estimated to take place around the end of June 2022, represents an upgrade to POS on the execution layer. After the Merge Ethereum will be a POS network only.
Why move to Proof of Stake?
Decentralization and sustainability are two of the key benefits of POS networks compared to POW networks. Instead of miners using computer hardware, proof-of-stake token owners offer their coins as collateral for the chance to validate blocks to secure the network, in turn they earn a staking reward.
What is Staking?
On a Proof of Stake blockchain, staking is the act of depositing tokens in order to become a validator; that is, to participate in proposing and attesting to transaction blocks. Anyone with a minimum necessary coin balance can validate transactions and earn staking rewards on these blockchains.
When are staking rewards enabled? When are transfers enabled?
Staking rewards were enabled on December 1, 2020. Transfers are not expected to be enabled until sometime after ‘The Merge’ (likely around the end of June 2022). Read more here.
What is the name of the asset being staked?
Ether (ETH) can be deposited in a one-way bridge contract to mint and stake ETH on the Beacon Chain (see here). Withdrawals will not be available until sometime after The Merge; in other words, this process is irreversible in the short term.
Which type(s) and what rate of rewards can I expect?
Can I stake locked/vesting tokens? Staking rewards are paid out every epoch (6 minutes and 24 seconds). Rewards will not be transferable until after ‘The Merge’. Post merge, priority fees will accrue to validators instead of miners. This will result in an increase to staking yield from about 5% today to an estimated 8% -14%. Eventually as more staking is added to the network the yield will be deflationary as seen in the estimate below.
(Based on estimates from Justin Drake).
How long does it take to unstake?
Your stake will not be able to be unlocked until sometime after ‘The Merge’. Once you have voluntarily exited, there's no way for you to activate your stake again, and you won't be able to transfer or withdraw your funds until sometime after ‘The Merge’. The unbonding period is uncertain and could range from 1 day to 3 weeks.
Are there risks associated with staking ETH?
Yes, a portion of your staked ETH can be slashed. You can lose ETH for malicious actions, going offline, failing to validate, or from double-spending. Figment insures our clients from slashing and has never had a slashing event.
Where can I explore the Beacon chain ?
Can ETH2 staking providers be treated as sub-custodians given the unique deposit contract mechanics and associated keys?
No. A validation-as-a-service provider isn't a sub-custodian since they have no control over the signing keys for either the ETH staking deposit contract address or the withdrawal address. The validator node itself is not a wallet that holds the ETH bonded to the validator. ETH is locked in the on-chain funding transaction, and withdrawals can only be made to the withdrawal address.
How is Ethereum governed?
Ethereum is the most prominent example of a network that uses off-chain governance. You can observe and/or participate in Ethereum governance activity here:
Where can I learn more about ETH2?

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