Staking, Ethereum's Mining Alternative, Will Be Profitable

Ethereum is soon to abandon bitcoin-style proof-of-work mining in favor of a long-in-development alternative system called proof-of-stake, but the economics are still being worked out.

Computer operators helping to validate transactions in a forthcoming version of ethereum - dubbed ethereum 2.0 - will see positive returns on their investment but not much, according to new data.

According to newly proposed numbers by ethereum creator Vitalik Buterin, validators - which are what miners are called in ethereum 2.0 - are projected to earn around 5 percent annually on their 32 ether investment.

This is because ethereum 2.0's code would attempt to dynamically incentivize the number of people staking their ether and taper reward issuance as more ether is staked.

It's important to note that the above estimates of the ethereum 2.0 reward issuance schedule are for a single validator run on independently owned computer devices.

Snapshot of validator returns on ethereum 2.0 using cloud services.

Even if profit is a net negative, Myers argues that some validators on the ethereum 2.0 network will still stake for two reasons.

In comparison, the ethereum 2.0 protocol would issue just under 100,000 ETH annually, assuming 30 million ETH were staked on the network.

One of the major benefits of ethereum 2.0 proof-of-stake is that if there's a bad actor, their [staked] ether can be slashed.

To this, Anthony Sassano also working on ETHHub with Conner added during an ethereum community call Wednesday that in his view lingering questions over reward issuance schedule on ethereum 2.0 simply won't find answers until the beacon chain goes live.