- 10% + of circulating Ethereum staked on Beacon Chain amid plummeting prices
- Users remain bullish on ETH prices
- The merge aims to improve the blockchain’s speed
With the current Ethereum coins in circulation standing at slightly above 120 million ETH, the Beacon Chain has over 12 million ETH staked. This is about 10% of the tokens in circulation, amounting to $34 billion at current prices.
The Ethereum staking reward stands at approximately 4.4% annually, slightly lower than the initial returns rewarded to stackers. But, this rate is higher than that of the fiat currency banks.
Staking surges ahead of Ethereum and Beacon Chain merge
The existing ETH 1.0 chain will merge with the ETH 2.0, the consensus layer, to improve the blockchain’s efficiency by upgrading to a Proof of Stake (PoS) system. It will also help reduce carbon production during ETH mining.
PoW consensus is energy-intensive and has angered environmentalists over the adverse environmental impact. PoS relies on the stakers to validate blockchain transactions, reducing the mining carbon emissions by staggering amounts.
PoS improves the blockchain’s ability to scale without compromising the network’s security system.
At the moment the Ethereum blockchain uses the PoW and PoS at the same time. Though only PoW is used to validate users’ transactions. Once the merge is fully complete, the blockchain will run using the PoS chain, referred to as Beacon chain.
Also known as Phase 0, the Beacon Chain’s major components are security scalability and sustainability.
Why is staking so important, anyway?
Staking is a popular way for investors to make earnings on their crypto assets. Most stakers lock up their assets, and in turn, they receive rewards at a calculated percentage.
The blockchain network being used also benefits from staking as the process keeps the system running. It also maintains the blockchain’s security.
Staking also facilitates the production of new blocks, which provides a high level of scalability to the blockchain network.
What next for ETH?
It is likely Ethereum’s issuance will drop by about 90%, making ETH a deflationary asset. Ethereum enthusiasts expect this will skyrocket prices.
Following the much-anticipated merge, the fees burnt per year will be higher than tokens issued. ETH’s supply will drop by 5% a year at similar fee levels.
ETH will also benefit from sharding, which will free each node from storing up the entire ledger. Specific nodes will only store data related to that specified shard. Sharding will allow for more transactions as there will be fewer nodes processing, making Ethereum blockchain faster and more efficient.
“It’s all about the speed of transactions using shard chains, making it much more energy-efficient and ultimately paying lower fees,” says Laurent Kssis, crypto ETF expert and director of CEC Capital.
