Ethereum 2.0 Economic Incentive Analysis: How much can the pledge annualized income be?

According to the plan, we will welcome Ethereum 2.0 at the beginning of next year, which will adopt the Casper PoS consensus mechanism, and for most people, economic incentives will be the biggest concern.

In order to participate in this system, participants can choose to invest 32 ETH, 1:1 pledge into BETH (beacon chain Ethereum) and participate in the verification (or small participation in the exchange or hosting service provider), and this process It will be one-way, and the question that comes with it is: How do we calculate the return on investment?

This article aims to discuss this issue, but we first need to clarify: Although we are investing in ETH, we receive BETH, and therefore, the final rate of return is also based on BETH.

In the phase 0 – phase 1 phase, Ethereum 2.0 has not yet opened the transfer function. Therefore, if you are not prepared for long-term currency holding, it is not suitable to be the verification node of Ethereum 2.0.

However, it is foreseeable that the exchange will open the BETH transaction pair in advance and provide the corresponding staking service, but it will not be opened by the system, so that the BETH transaction pairs of the major exchanges will be It has been in a stand-alone version for a long time.

In terms of price, individuals think that BETH ≤ ETH, but will not deviate too much, we can approximate that they will be equal.

Ok, let's go back to the question of return on investment. The proposal made by Vitalik is as follows:


A simple translation is: When there is 1 million ETH 1:1 converted to BETH and participated in Ethereum 2.0 verification, the maximum output is 181,019 BETH per year, and the annualized income is 18.10%.

But in fact, Ethereum 2.0 needs to pledge 2 million ETH to start, so the first reference does not make much sense.

When there are 10 million ETH 1:1 converted to BETH and participated in Ethereum 2.0 verification, the maximum annual output is 572433 BETH, the annualized income is 5.72%.

Then we can infer a formula:


Where X is the number of ETHs involved in the pledge and Y is the maximum annual output of BETH.

In this regard, members of the community raised his questions:



“It seems that the first batch of certifiers is going to take a huge risk. 32 ETH is $6,000 at the current price. Why do I have to take $6,000 and burn them in exchange for something of unknown value?”

My personal opinion on this issue is that the first batch of certifiers bears relatively high risks, but the potential annualized income will be more. For example, there are 2 million ETHs involved in pledge, then the participants' BETH annualized income is probably At 12.8%, this value is much higher than the 6%-7% of the exchange's loan income. Therefore, the realization of this goal is not difficult, but when the quality deposit reaches about 10 million ETH, the return on participation in the pledge may be Less than the lending business, the willingness of investors to participate will drop a lot, and individuals tend to think that this order of magnitude will stay for a longer period of time.

According to Ethereum 2.0 researcher Justin Drake, the goal of Ethereum 2.0 is to attract about 32 million ETHs to participate in the pledge. In this case, the annualized return of the participants is about 3.2%, and the annual inflation of the entire Ethereum system. The rate is about 1%. In addition, assuming that each piece consumes an average of 1,000 BETH of gas per year (about 100 times less than today's Ethereum 1.0 consumption), half of the gas will burn, then the system's actual annual inflation. The rate is 0.5%.


And this goal, personally think that at least after waiting for phase 2 to complete (that is, Ethereum 2.0 to achieve the transfer function) can be achieved.

Conclusion: In the initial stage (2 million), investors invest 32 ETH, then 1 year is expected to be (32 BETH + 4.096 BETH), in the medium term (10 million), investors invest 32 ETH, then 1 year is expected (32 BETH+1.8304 BETH), and in the later stage (32 million), investors invest 32 ETH, then 1 year is expected to be (32 BETH+1.024 BETH).

Note: The above analysis is based on the PoS output proposal from Vitalik and may eventually change.

What is your opinion?

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