3 Ways Staking Will Upend the Economics of Ethereum

As ethereum undergoes a major upgrade in 2020, how might the economics of the second-largest blockchain begin to shift?

Collin Myers, head of global product strategy at Consensys, the Brooklyn-based ethereum venture studio, said validators with 32 ETH can expect to earn between 4.6 and 10.3 percent in annualized returns at the launch of the Ethereum 2.0 network.

"The ETH 2.0 Calculator [is being] developed for protocol researchers, validators and enthusiasts to increase transparency and education of the Ethereum 2.0 network economics," Myers said in a Devcon presentation.

"These are proposed suggestions by ethereum research but until we actually roll over to Ethereum 2.0, none of us will know for sure. They're constantly tweaking it right now. It can be pretty fluid."

One of the most recent proposals by ethereum cofounder Vitalik Buterin suggests a sharp reduction in the number of mini-blockchains, or shards, in the initial phases of Ethereum 2.0 deployment.

Validators on Ethereum 2.0 who stake 32 ETH have the potential to earn 10.4 percent in annual interest given the assumption the network launches with 2 million ETH staked.

Following the launch of Ethereum 2.0, a greater number of validators will be needed to secure the Ethereum 2.0 network and ensure the honesty of all actors.

Annualized rewards for validators on Ethereum 2.0 depend on the overall amount of wealth staked as well as the total percentage of validators online actively processing transactions.

That said, controlling ether supply growth on the current ethereum mainnet has been a persistent source of contention for the ethereum community since launch in 2015.

Currently, inflation on ethereum is approximately 4.5 percent, according to ethereum information site ETHHub.