Ethereum 2.0 should be safe and scalable, but presents risks for users
Along with more advanced scalability and security for the Ethereum network, the upcoming upgrade of Ethereum 2.0 to a proof-of-stake model promises to bring new additional benefits to its users as well. One of the main attractions, which encourages the purchase of Ether (ETH), is a staking model that allows to receive passive income for the validation of transactions. And here, users can choose between two different options: the first involves depositing 32 ETHs and running validation node software, and the second allows staking without having to deposit or run nodes when joining third party groups.
The numbers speak for themselves, as 66% of the Ethereum community are in favor of staking with the rest still unsure of their choice. However, with promising benefits, the new upgrade may also bring some risks. How will the new staking model affect those who choose to stake, maintain, or trade, and what might be the negative scenarios for those who choose to continue mining the old network?
Most experts believe that the upgrade to Ethereum 2.0 will have a positive impact on ETH’s price and trading volumes. In fact, staking may open wide investment perspectives for those who prefer the strategy of buying and holding rather than trading ETH futures. According to Changpeng Zhao, Binance’s CEO Crypto Trader, staking will help to stabilize cryptomone prices, since it encourages users to make purchases in the market and establish limited sale orders.
Ethereum 2.0: The choice between an own node and a staking service
Another expected benefit is that the launch of the upgrade will reduce costs and accelerate network transactions at the expense of a drop in the cost of gas. Speaking about the positive changes that Ethereum 2.0 can bring to the market, Praneeth Srikanti, the investment manager of ConsenSys Ventures, told Cointelegraph:
„Proof-of-stake comes with a number of improvements, including energy efficiency, lower entry barriers, stronger cryptoeconomic incentives and greater rewarding capabilities for a wider set of users. We also believe that there would be an increased demand for ETH, as users would begin to gain opportunities to find new returns based on staking rewards and contribute to chain security and present some interesting dynamics with current usage by locking ETH assets into DeFi protocols.
However, despite a number of advantages, updating Ethereum 2.0 carries the risk of significant negative consequences for users and network stakeholders.