Double ETH Staking Rewards, Vitalik Proposes – What Does It Mean For Ethereum Investors?

Ethereum co-ffounde, Vitalik Buterin, has made a suggestion regarding Ethereum’s staking rewards for its upcoming upgrade to Proof-of-Stake (PoS). The proposed rewards system would bring more security to the protocol, it is suggested.

Buterin said the change was considered based on community feedback,

An issuance increase is proposed based on community feedback, to 2**21 ETH if 2**27 ETH is validating, along with an agreement to set the base reward quotient based on a pre-set max issuance bound once all protocol details are finalized.

Ethereum Foundation member, Justin Drake, said that the move would do well for security in the long-term,

Targeting 2^25 ETH at stake (~32m ETH) for the long term feels about right for strong security. In such conditions, the base inflation would be ~1% and the base return ~%3.2%. Assuming each shard consumes on average 1,000 ETH in gas per year (about 100x less than what Eth1 consumes today), with half of the gas burnt, then inflation would be ~0.5% and the validator return ~5%. Feels healthy! If we get significantly less than 2^25 ETH at stake then doubling the base inflation wouldn’t be unreasonable.

Drake also took into the account the fact that a certain number of Ether would be burnt, calculated that with 1000 ETH spent on gas per shard annually, the inflation rate would amount to about 0.5%.

Community Members Seem to Appreciate the Proposal

The Ethereum cryptocommunity has generally welcomed the proposal, saying that the reward rate is more fair. One user, RTylerSmith, said,

I appreciate the issuance rate being reconsidered. The reports published about validating economics showed compelling evidence that this needed to be revised upwards. I agree that this “feels” more in line with what validators would expect and will help network security compete with alternative options like DeFi and other platforms. I expect to participate as a validator at these rates.