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Saturday, February 27, 2021

Coming Soon To Coinbase: Earn 7.5% Interest On Your Ethereum

What’s better than the best performing asset of the past 12 months, whose 550% return (even after today’s rout) has outperformed Bitcoin over the same period? Why clipping 7.5% in annual interest, of course.

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That will be the biggest benefit coming to (long-term) holders of Ethereum (which unlike bitcoin wasn’t created to be digital money but rather a new kind of global, decentralized computing platform) as it transitions to Ethereum 2.0, which will provide staking rewards of up to 7.5% simply for holding the world’s second largest cryptocurrency. 

In a blog post published by Coinbase (which just hit a valuation of over $100 billion), customers can now sign up to stake their ETH into the Beacon Chain smart contract, the coordinator and bridge between the old Ethereum and Ethereum 2.0, the network’s momentous migration to a proof-of-stake network.

This upgrade, Coindesk notes, will do away with proof-of-work mining in favor of staking: “Typically, you need 32 ETH to run a validator node for Ethereum’s new blockchain, but Coinbase will allow their users to stake any amount of ETH in their account.”

Some more details from the Coinbase blog:

Starting today, the waitlist to earn staking rewards with ETH2 is live. With the new Ethereum upgrade to ETH2, Coinbase customers will be able to earn rewards using the second most popular cryptocurrency after bitcoin.

Staking allows customers to earn a yield of up to 7.5% for simply holding ETH2. The reason your crypto earns rewards while staked is because the blockchain puts it to work by making the underlying blockchain of that asset more secure and more efficient.

By joining the waitlist today, customers will be first in line to earn ETH2 staking rewards. Getting rewarded with different cryptocurrencies is one of our top requests. We initially announced our support for ETH2 last fall, and we’re excited to be one step closer to delivering on our promise. We first started offering staking rewards in 2019 with Tezos, and then Cosmos last year. The ability to earn rewards, simply by holding cryptocurrencies, is made possible only with crypto-based financial services.

Once off the waitlist, there are no minimum amounts required to stake, and customers can convert, stake, and earn rewards on a portion of Ethereum instead of their entire balance. They will also be able to see their rewards add up in real-time through the lifetime rewards ticker in the Coinbase app or on Coinbase.com.

Initially, customers will not be able to sell or send the portion of Ethereum that they choose to stake. However, Coinbase will offer a way to trade any staked Ethereum in the coming months. Coinbase will continue to share more information about ETH2 rewards once it becomes available. Customers in New York State are not currently eligible to sign-up for the waitlist.

In exchange for the service, Rhea Kaw, a senior product manager for Coinbase’s retail team, told CoinDesk that Coinbase “take[s] a commission on all rewards received, and the return rate for our customers reflects this commission,” Kaw said. Per Coinbase’s User Agreement, this staking commission is 25% of the rewards received. 

Besides Coinbase, Kraken exchange also stakes ETH on behalf of their customers and is actively depositing ETH into Ethereum 2.0’s Beacon Chain contract. Popular web and software wallet MyEtherWallet supports in-app Eth 2.0 staking as well.

Ethereum 2.0:

The “Beacon Chain” – the backbone of Ethereum’s new design – went live in December and so did Ethereum 2.0’s deposit contract. To claim a stake in the new network, Ethereans can deposit legacy ETH into this contract to convert it to ETH2 (aka Beacon Chain ETH, or BETH).

Once ether is deposited into the Beacon Chain, it cannot be withdrawn directly – however, using an exchange will be one way of getting around this restriction. Kaw told CoinDesk that “initially, [Coinbase] customers will not be able to sell or send the portion of [ether] that they choose to stake. However, Coinbase is exploring avenues by which to give customers a way to trade their staked ETH very soon.”

Zerohedge

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