News // 26th November 2020

Ethereum 2.0 Investor FAQ

WHAT IS ETHEREUM 2.0?

  • Ethereum 2.0, also called Eth2 or “Serenity”, is the next major change to the Ethereum blockchain.
  • It introduces an experimental Proof of Stake consensus mechanism, moving the network away from its existing Proof of Work architecture.
  • Although Ethereum 2.0 will not introduce a new type of ETH token, ETH holders will be able to participate and earn rewards for staking on Ethereum 2.0.

 

WHAT IS THE TIMING FOR ETHEREUM 2.0?

  • After many years of anticipation, the Beacon Chain staking deposit went live on November 4th. It reached the 524,288 ETH required to activate Ethereum 2.0’s Beacon Chain on November 24th, and the launch date of “Phase 0” is now set for December 1st (i.e. 7 days after the threshold was met).
  • However, the full scope of the Ethereum 2.0 updates will not take place at a single point in time; instead, it will develop in several phases over the next few years.
  • The first phase, namely “Phase 0”, includes the launch of the Beacon Chain. The Beacon Chain stores and manages the registry of validators and will deploy the Proof of Stake consensus mechanism.
  • The second phase, namely “Phase 1”, includes the implementation of shard chains and is expected in 2021 .
  • In “Phase 1.5”, Ethereum 1.0 (the current chain) will merge with Ethereum 2.0, which is projected by the Ethereum Foundation to occur in 2021.
  • Currently, neither the full structure nor the timing for the last phase, known as “Phase 2”, is clearly defined; however, it is meant to enable the  transfers and withdrawals, cross-shard transfers, and the capability to build applications. It would necessarily be activated some time after Phase 1.5.

 

HOW WILL STAKING WORK?

  • ETH holders wishing to participate must meet some specific requirements (e.g., a minimum entry threshold of 32 ETH is required).
  • Staking will begin once the Beacon chain goes live on December 1st, 2020, following deposit contract activation and the annualised rate of return for staking ETH is expected to be around 4%–10%. The return will be paid in ETH.
  • However, in order to participate in staking at the earliest phase, a user may potentially need to lock up the ETH until Phase 1.5 (when the two systems (Eth1 and Eth2) are merged) is complete.

 

 

HOW WILL ETHEREUM 2.0 AFFECT XBT PROVIDER CERTIFICATES?

  • We continue to monitor the developments in the Ethereum ecosystem closely.
  • In particular, we are focussing on the extent to which there is a development of technologically robust and transparent architecture.
  • As Ethereum 2.0 develops, we will consider the extent to which staking opportunities are in the interests of investors and are compliant with mechanics of our certificates and the securities laws to which they are subject.
  • We place a lot of emphasis on the security and safety of the ETH that we hold to back the notes and will continue to maintain our existing security protocols, which we believe are very robust.
  • Final announcements will be made via our website in due course.

 

For further technological information on Ethereum 2.0, please refer to our more extensive FAQ here




[1] https://blog.ethereum.org/2020/11/04/eth2-quick-update-no-19/

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