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Interested in Ethereum 2.0 and staking? Coinbase launches incentive program

Key facts:

The exchange office offers up to 7.5% annual yield to its users.

The net income would be less as Coinbase will charge 25% in commissions.

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The US exchange for bitcoin (BTC) and cryptocurrencies, Coinbase, activated a waiting list for what will be its incentive program when staking in Ethereum 2.0. The exchange house announced that users can now reserve their quotas and obtain an annual yield of up to 7.5%.

Coinbase explained that there will be no minimum amounts to participate and that users will be able to convert, block and earn rewards with a part of their ethers (ETH), the native cryptocurrency of the Ethereum network. The monitoring of the incentives obtained would be done in real time through the creation of a rewards ticker.

“Getting rewards with different cryptocurrencies is one of our main requests (…) initially the clients (users of the platform) will not be able to sell or send the portion of ether that they decide to block,” the exchange said.

It must be remembered that the funds arranged by the operators for Ethereum 2.0 will remain blocked for at least two years. That is, it will not be possible to sell the committed ETH directly. However, Coinbase said that it will offer an alternative to users who participate in staking.

From the above it follows that the exchange house could offer a token pegged to ETH for users to trade a cryptocurrency representing your blocked funds. In fact, it would be the BETH (Beacon ETH) token that would have a 1: 1 relationship with ether.

Although it does not mention it in its press release, Coinbase charges a 25% commission for its staking services, as can be read in its “Coinbase User Agreement.”

“If Coinbase Europe or one of its subsidiaries successfully validates a block of transactions in that digital currency, you will be able to get a reward (…) Your reward will be determined by the network protocols. Coinbase Europe will distribute this reward to you once it is received by Coinbase Europe, minus a 25% commission ”, the document can read.

Ethereum 2.0 in its first phase

CriptoNoticias reported on December 1, 2020 on the activation of phase 0 of Ethereum 2.0. It was about the birth of the Beacon Chain, a network that will allow a registration of validators and that will act as a bridge between version 1 of Ethereum and the second version, also known as “Serenity”.

ethereum post ecosystem update

Participating validators have already blocked over three million ETH. Source: ethereum.org

To be a validator, a user must deposit 32 ethers in the smart contract provided by the network. In case someone wants to participate and does not have the necessary funds, there are alternatives such as those proposed by Coinbase and other pools that offer to staking Ethereum 2.0 with lower amounts. In return, operators receive incentives.

One of the main goals of Ethereum 2.0 is change your current Proof of Work consensus protocol (PoW), based on computing power and electrical energy, to a Proof of Stake (PoS) based on capital and software.

According to the CriptoNoticias glossary, the PoS mechanism is a distributed protocol in which transactions are processed proving the possession of the cryptocurrencies themselves. The possibility that a participant finds a block and decrypts it is proportional to the amount of cryptocurrencies stored by the participant on the network.