Staking is the new mining: ETH2 grabs the attention of serious investors
This year, cryptocurrency staking has taken off and has evolved from being the preserve of specialists and enthusiasts toward capturing the minds of serious investors with pragmatic perspectives and an understanding of how the future of digital assets is likely to look.
Staking, which is a term that describes the process which involves individuals committing their crypto assets to support a blockchain network and confirm transactions which is specific to cryptocurrencies that use the proof-of-stake model to process payments, has brought another dimension to cryptocurrency investment, in that it complements the nature of cryptocurrency as a store of value.
Thus, by participating in staking, cryptocurrency can be held rather than traded, and put to work to earn a passive income whilst holding onto the asset itself.
This has become so popular that the new upgraded version of Ethereum, known as Ethereum 2.0 or ETH2, has been a major focus for many who have opted to tkae part in its staking process in the advent of its launch.
As September drew to a close, data was made available to show that there are now over 215,000 validators for the forthcoming ETH2 network, and that over $21 billion has been staked on the deposit contract that allows cryptocurrency holders to participate in staking.
One of the most interesting aspects of the ETH2 upgrade to Ethereum is its highly refined smart contract functionality.
Perhaps one of the most important blockchain related developments which has created a large number of use cases, smart contracts operate as a type of Ethereum account, meaning that they have a balance and they can send transactions over the network. \
They are an instrumental part of the topography of decentralized finance (DeFi) in that rather than being controlled by users, they are deployed to the network and run as programmed.
User accounts can then interact with a smart contract by submitting transactions that execute a function defined on the smart contract. Smart contracts can define rules, like a regular contract, and automatically enforce them via the code.
This means that all manner of commercial and private transactions from renting property to hiring freelancers could be conducted in this fashion, making a truly decentralized global standard for many areas of financial and contractual life which are today bureaucratic and non-democratic.
Bearing in mind that the staking process for Ethereum 2 is highly attractive as it earns a passive income and allows users to take their part in developing the upgrade to Ethereum and that the smart contract capability is a hugely attractive feature, there is another important point that ETH2 brings to the table which is also on trend at the moment, and perhaps is another factor that is attracting investors.
As the environment and perceived climate change is high on the agenda for many Western governments, Ethereum’s plans to cut energ consumption by next year are likely to be one of its ace cards.
The Merge, which is a process that will eventually merge the Ethernet Mainnet with the beacon chain proof-of-stake system, is Ethereum’s new plan to cut energy consumption by 2022, and upgrade the entire network’s energy use by over 99%.
The energy reduction is expected to be possible due to this new form of proof-of-stake validation transactions which will replace traditional cryptocurrency mining, allowing people to become validators and is a priority for developers as many ETH2 researchers are currently working on more ways to accelerate the process of the merge.
This not only strikes a chord with the current focus on ‘going green’, but also indicates a sustainability factor which decentralization makes possible, and could create a bullish sentiment given the current clamor around traditional energy use – see the energy company exit from the United Kingdom last month in which 9 companies declared bankruptcy and the remaining firms putting up the prices susbtantially.
Therefore, if domestic energy in western countries goes up dramatically, the advantage of traditional mining is likely to be looked at, hence this new method solves two issues; the climate question and the cost/sustainability question with regard to creating the cryptocurrency.
Staking is part of the future of the entire decentralized financial services business, and CoinMetro began XCM staking this summer.
Staking has always been a key piece of the puzzle since our original whitepaper, and CoinMetro worked with great attention to detail to build out the various parts of the platform, give the token utility, and reach a certain level of maturity before unleashing XCM Staking.
Those participating are able to choose their own staking plan which fits their financial goals, the process being very user-friendly and straight forward; all that is needed is for those participating to pick the amount of XCM they want to stake, and the duration it will be staked.
CoinMetro’s easy-to-use interface provides a detailed summary of the selected plan which automatically updates as changes are made.
In doing this, a passive income can be earned. Traders at CoinMetro can earn a passive income of up to 5% interest with XCM Staking. Choosing a custom plan in which more than 50,000 XCM is staked for one year places the participant in the highest earning tier.
Outside of the CoinMetro native token, CoinMetro was the first to offer KDA staking just a month ago.
Tokens of this nature are very much intrinsic to the future of DeFi, and the massive number of participants in the ETH2 staking process is absolute testimony to that.