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With the launch of our newest ETH 2.0 Staking portfolio, we thought it’s best to cover exactly what it is, why it’s important, and why we’ve decided to offer this portfolio to begin with.
In case you missed it, we're currently running a 200,000 Sat promotion (~$42.60 at the time of writing)! If you invest at least $50 in the ETH 2.0 Staking portfolio by Wednesday 11:59 pm PST, you will have a chance to win! We will be choosing 10 lucky winners by random.
Let's hop right in.
Nugget #1: Understanding Proof of Work and Proof of Stake
A consensus mechanism allows the distributed network of nodes to reach an agreement on the current state of the network, work together in sync and stay secure. For Ethereum and Bitcoin, the consensus mechanism is Proof of Work (PoW) where GPU-Miners compete to form new blocks with completed transactions that will be shared with the network and added to the chain. The fastest to solve a complex math equation is rewarded the underlying token of the network (i.e. ETH, BTC).
Proof of Stake is what the Ethereum foundation is trying to move the network over to in September. Proof of Stake is supposed to drop energy consumption by ~95%+ and switch from mining to staking, where nodes on a network stake ETH, and through a complex process validate the current network. If the node acts badly, they lose their staked ETH, thus making a network attack or behaving poorly an expensive endeavor.
Nugget #2: Staked ETH ~ stETH
To launch a Proof of Stake network, users need to either deposit ETH into a pool or set up their own node which requires 32 ETH. To account for the ETH staked, the network gives back staked ETH (stETH) which is a derivative currency to show the user's claim of staked ETH in the network. Put simply, I go to a casino, deposit $100, and get back $100 worth of chips.
For now, the staked ETH is illiquid until ETH 2.0 fully launches with the Merge, and the network opens up un-staking mechanisms (not planned until after Merge).
Put simply, you generate yield which is currently a little under 5% but many expect it to be high single digits and potentially low double digits post-Merge. The yield calculation is complex but there are some basic factors: amount staked, network usage, demand, and complex transactions. The yield is the incentive mechanism for those to set up/deposit/operate nodes to validate the new ETH 2.0 network. It is geared towards long-term holders or those that want to generate some passive income with their ETH. The yield is driven by fees generated by network usage. In the past, the fees were given to miners, after the merge they will be given to stakers.
LIDO.FI is the leading on-chain protocol that allows you stake in a pool on chain with over $7.1B in assets. Recent stats show $200M in rewards paid and a total of 171K stakers. They are by far the largest protocol on-chain.
Ember has recently launched the ETH 2.0 Staking portfolio to bring you the benefits of staking in the simplest format possible.
Nugget #3 – Merge is Upon Us
We have talked a lot about the merge over the past few months. This will be a simple update.
The Merge is upon us after the successful test in August, the Ethereum foundation has slated mid-September as the target date to push the Merge on the main net.
If you need a quick refresher on the merge, feel free to check out our recent blog post here.
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