ETH 2.0 Staking Penalty and Yield Changed To Incentive Participation

In a tweet on Nov 11, Vitalik Buterin has said the penalty rate in the early weeks of the Eth2 Beacon Chain mainnet launch is being reduced to between 25 to 33 percent of the Medalla test network level. Additionally, if 524,288 ETH is staked on time, early validators will enjoy a re-adjusted APR of around 25 percent, an incentive for participants who were initially wary of slashing and network penalties affecting their profitability. 

The Journey to Serenity

Ethereum is planning to power off the Proof-of-Work consensus algorithm and institute scaling solutions with hopes of addressing the high network fees and on-boarding of more users. 

However, the process will stretch through several years and involve jumping over critical technical hoops. In a three-stage migration, Ethereum will transit to a scalable, sharded chain with validators instead of miners.

Threshold Conditions 

To kick-start the process, there ought to be 524,288 ETH staked at the Beacon Chain deposit contract. 

Less than two weeks before Nov 24—the day the minimum threshold as far as ETH staked and validator count are support to be met, slightly over 58,433 ETH is deposited—or 11 percent of what’s required, according to streams from Etherscan.

There are valid concerns that the first phase of Eth2 may not come to pass on Dec 1, 2020, as earlier projected. The main reason is the low participation rate. 

Earlier on, and before today’s announcement by Vitalik, validators who contribute 32 ETH for the threshold amount to be met would rightly receive a 22.6 percent annual yield. 

Doubts on Timely Launch

The amount, observers say, is too low. In their view, the opportunity cost—especially in light of the mouth-watering yields offered by DeFi protocols, is also too high. Besides, there are risks of slashing when nodes try to game the system or unreliably operate. Even with this reduction, it may be too marginal if attestation performance is low.

As such, some—despite the decent yield in the early years of Eth2 Beacon Chain mainnet, are opting for a wait-and-see approach.

Ahead of Eth2, BTCManager reported a temporary network split after a stealth bug fix by Ethereum developers forced outage of nodes running on old but stable versions of Geth clients.

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