The highly anticipated upgrade from ETH 1.0 to ETH 2.0 has been in the pipeline for a couple of years now. The initial phase, Beacon Chain, has been running full nodes on testnet since May, and staking rewards are being paid out to validators testing the new platform.
The mainnet launch is unlikely to happen until later this year at best or even early 2021. A recent report has taken a deep dive into the economics of ETH 2.0, and it appears that many holders of the world’s second-largest cryptocurrency are already primed for staking.
Ethereum Ready to be Staked
The research was carried out by ConsenSys corporate development personnel Tanner Hoban and Tom Borgers following a grant by MolochDAO in March. The economic model for ETH 2.0 is far more complex than the current proof-of-work system and is reliant on nearly 100 variables that have a material impact on validator revenues, costs, yields, and network issuance.
One of the findings was that 77.7% of the total supply, or approximately 86 million ETH, is being held by non-exchange wallets with a balance of over 32 ETH. 32 is the minimum amount of Ethereum required to run a full node and earn staking rewards. It added that an additional 18.7 million ETH is managed by exchanges subject to staking services, and concluded that:
“This is a compelling serviceable addressable market, and a key objective of the incentive program to maximize network participation should be to convert these wallets into active validators.”
This could also mean that a few whales are holding the largest bags, but Etherscan does confirm that eight of the top ten ETH addresses all belong to centralized exchanges. The findings are favorable for the future of Ethereum, which has been generally flat in terms of price for almost two years.
Supply and Demand
If the lion’s share of asset supply is being held for staking, there will be less of it available to trade openly on markets, which will drive up demand and prices when ETH 2.0 is finally launched.
The DeFi boom this year has failed to raise the price of ETH despite markets hitting an all-time high in terms of total value locked, which is currently 3.5 million ETH, or 3.1% of the total supply. Prices are still weak at around $230, which is still 83.5% down from its ATH in January 2018. It appears that 80% of Ethereum holders and investors are waiting for one thing only … Beacon Chain.
The report also delved into the security of the new blockchain, and possible problems that could arise with liquidity when PoS finally rolls out.