New data shows that Ethereum staking has passed another milestone as more than 10% of total ETH supply is now locked within the deposit contract in anticipation of Ethereum 2.0 or Consensus Layer later this year.
What is Ethereum 2.0 (Ethereum Consensus Layer)
Ethereum 2.0 also called ETH2 is an upgrade to the Ethereum blockchain. The upgrade to Ethereum is designed to enhance the speed, efficiency, and scalability of the Ethereum network so that it can process more transactions, ease bottlenecks and lower costs associated with transactions.
The upgrade will bring Ethereum from a proof of work blockchain over to what many consider a better and environmentally greener proof of stake blockchain. Proof of work pits miners against each other, as they compete to solve a difficult math problem. Any miner who solves the problem first, updates the ledger by appending a new block to the chain, and gets newly minted coins in return. This requires an enormous amount of computing power and, thus, electricity. Critics of proof of work blockchains argue that they waste massive amounts of electricity and also generate electronic waste. Specialized computer servers used for crypto mining often become obsolete in 1.5 years, and they end up in landfills.
Proof of stake does away with miners and replaces them with “validators.” Instead of investing in energy-intensive computer farms, you invest in the native coins of the blockchain you plan to validate on. To become a validator and to win the block rewards, you lock up (stake) your tokens in a smart contract, a bit of computer code that runs on the blockchain. When you send cryptocurrency to the smart contract’s wallet address, the contract holds that currency usually for a pre-determined amount of time, sort of like depositing money in a vault.
Ethereum 2.0 smart contract reaches over $35 billion in staked value at current prices of Ethereum
In anticipation of Ethereum’s upgrade to a proof of stake blockchain, over 10% of Ethereum’s supply has been sent into the Ethereum 2.0 deposit contract. That’s over $35 billion in staked value at current prices of ETH.
- According to data from Etherscan, 12,334,099 ETH is generating income through the deposit contract at the time of writing. By comparison, ETH’s total supply is estimated at about 120,642,170 ETH.
- The deposit contract’s current holdings make the Ethereum network the second largest in terms of staked value right now, behind Solana. It appears to be growing rapidly, having just passed 10 million ETH in March.
- The yield however, compared to other networks is low, with ETH yield at 4.3% against Solana’s 5.41%, and Terra’s 5.96%
- Ethereum 2.0 was scheduled to launch by July of this year, but has been delayed. The ETH2 upgrade has been delayed multiple times over the years, but developers are determined to roll it out in order to reduce Ethereum’s energy footprint and high gas fees.