The first question on every Ethereum holder’s mind these days is one they’ve had for a (very) long time now..
“When Is Ethereum 2.0 Coming Out? When Is The Merge Happening?”
And with Ethereum launching the Kintsugi testnet earlier in December, it looks like “The Merge” is edging ever closer.
“The Merge” is an upgrade to Ethereum that is going to replace the current Proof-Of-Work (PoW) consensus mechanism with a more eco-friendly, fast and secure Proof-Of-Stake (PoS) consensus mechanism.
When The Merge happens, Ethereum will fully transition from what is dubbed as “crypto mining” into “crypto staking“.
But what it also means, and that’s a big one, is that all the fees that are currently being paid to Ethereum miners, are going to be awarded to Ethereum stakers instead.
It’s only natural then that the second question everyone is thinking about is the ETH 2.0 staking rewards post merge, and how much the APY is going to be exactly.
If we can take Justin Drake, one of the leading Ethereum researchers in the world by his word, the numbers are looking pretty good.
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What Will ETH 2.0 Staking Rewards Be After The Merge?
Right now we’re sitting around the 4.5% mark for Ethereum Staking Rewards during the time of this writing, which is quite a steep decline from the 12% to 18% that the Beacon Chain was distributing to stakers when if first launched.
Mr. Drake believes that once EVM fees, along with daily flashbot bribes are added to the current ETH 2.0 staking rewards provided by the Beacon Chain, the numbers will look something like in the table below.
These numbers seem pretty exciting to Ethereum stakers, especially for those who started staking early and still remember the great returns of the first couple of months.
Even with Justin Drake’s conservative projection, we’re still talking about ETH 2.0 Staking Rewards Post Merge at 9%
One thing to keep in mind though is that this is just a forecast, a projection.
The previous projection from April saw Justin Drake predict much higher numbers.
In reality, just 6 months down the line, this projection turned out to be way too bullish and optimistic as far as Ethereum Staking APR post merge is concerned. Mainly due to the fact that the rate of new validators and the amount of ETH staked on the Beacon Chain grew much faster than expected.
Ethereum Staking Rewards Will Drop After The Merge
Yes, this is also to be expected.
You see, a successful merge is very likely to bring a lot of attention to Ethereum, not only from within the crypto community, but likely even mainstream media.
Everyone is going to start taking Ethereum much more seriously, and the potential for making high returns will get a lot of new investors gunning for some sweet 9% – 12% staking APY.
But once that happens, those numbers will start dropping pretty quick, because the more validators there are, the less staking rewards each validator gets.
According to projections, the numbers are expected to settle somewhere in the 4% to 5% range eventually, even with EVM fees and flashbot bribes.
At the same time, all the new validators and staked ETH will also mean that there’s increased demand for ETH.
Why Is Ethereum Switching To Proof-Of-Stake?
Ethereum is currently using Proof-Of-Work and mining to validate transactions and create consensus in order to power its blockchain. But there’s a pretty big problem with this mechanism: It’s extremely energy consuming to say the least. And in the current world climate, that’s not a good thing at all.
Proof-Of-Stake on the other hand, uses a totally different mechanism to achieve the same results. It does it faster, better, but more importantly: while consuming 99% less energy.
There’s still a lot of debate on Crypto Mining vs Crypto Staking among leading online figures, but the Ethereum community has made its choice by going all-in on Staking.
This article is for educational purposes only. Not financial advice.
Please make sure to read our Disclaimer before making any financial decisions.