Ethereum investors are gearing up for the ambitious 2.0 upgrade. There’s been much talk about 32 ETH – but what exactly is magical about 32 ETH, and what is at stake anyways?

Proof-of-stake (PoS) is an increasingly popular consensus model that Ethereum is currently transitioning to from the proof-of-work model (PoW). The best way to understand PoS is to understand what it is replacing. The PoW consensus – the current mechanism behind Bitcoin and Ethereum – is run by miners around the world competing for the right to create the next block in the chain by solving math problems using expensive hardware and electricity. Successfully creating a block rewards miners with a small amount of Bitcoin – hopefully, enough to cover costs. PoS, the proposed alternative in ETH 2.0 looks to improve upon this original security model, mainly avoiding vast energy consumption and costs.

PoS is a model where the right to create the next new block is proportionate to your Ethereum staked. Choosing to stake Ethereum requires a minimum deposit of 32 ETH to a smart contract. It can be expected that most major exchanges and crypto institutions will provide services for their users, meaning the choice to stake will come down to the click of a button. Participants looking to stake will have the option between solo staking or using custody as mentioned above and will only require a decent laptop rather than an expensive PoW mining set up. Now that PoS is clear; to stake or not to stake, that is the question.

At the time of writing, acquiring the minimum staking amount would cost $11,136, which is derived from the current cost at $348 multiplied by 32. If ETH continues to rise leading up to the beginning of genesis staking, it isn’t hard to imagine a cost of $15,000, $20,000, or $30,000 in total. This would coincide with  a price of $470, $625, and $937 per Ethereum, respectively. Some may argue that an expensive ETH cost may deter on-the-fence participants who haven’t already acquired the minimum amount to stake. The flip side of that token is that there are investors buying ETH now that are experiencing staking FOMO, thus driving up the price of ETH. The next thing to consider is the reward for staking. Based on a sliding scale model, the more ETH validating the network means the lower the reward. It is estimated that staking will result in a return between 1% and 10% annual return depending on the number of participants and market conditions.

Some ETH holders may just prefer to hold their coin on traditional crypto interest accounts like BlockFi and accumulate a set interest there. Also, crypto exchanges like Voyager offer competitive interest rates at a fraction of the required ETH, which could offer better long-term gains. Staking also means that your coin is out of immediate reach and withdrawing the staked tokens comes with a minimum 18-hour wait. For ETH holders, locked up Ethereum means less being sold on the market, a good long-term value proposition.

From the Wolf Team’s research, staking seems best suited for those playing the long-term ETH game looking to set it, forget it, participate on the network, and realize steady gains. If you do plan on accumulating 32 ETH, waiting for the perfect price opportunity may come at the cost of not being able to afford the opportunity when it comes. Plan accordingly.

By Adam Tarlowski