en
Back to the list

From $18k to $100K in ETH: The Growing Cost of Becoming an Ethereum Validator

source-logo  coinfomania.com 16 August 2021 18:15, UTC

There are many metrics that could be used to measure the massive increase in the price of most cryptocurrencies over the past year. However, there could be no better way to compare ETH price movement than a throwback to roughly ten months ago. 

Following the announcement of a timeline for the roll-out of Ethereum 2.0 in October last year, developers set a 32 ETH benchmark for anyone who would assume a validator role in the network. Given that Ethereum will transition to Proof-of-Stake (PoS) upon the launch of the network, onboarding validators was very important.

Like miners, validators help to confirm transactions on the blockchain, but this time, they don’t need to expend massive amounts of computing power to do so. By committing a certain amount of funds (in this case, 32 ETH) anyone could become a validator on the Ethereum network. 

Validators earn rewards for their service, with earlier estimates indicating a roughly 6-7% APR for validators upon successful launch of Ethereum 2.0.

Talking about price, 1 ETH was exchanging hands for roughly $600 at the time the Genesis Block got Ethereum 2.0 was mined. In other words, one could become a validator for less than $20k.

Fast-forward to the present and many milestones later, an ETH validator node now costs over $100k as the value of ETH has skyrocketed to new highs. Even more telling is that at its peak of around $4300 per ETH in May, one needed over $120k worth of ETH for the same validator role. 

Admittedly, there was a demoralizing factor for anyone who was hesitant to become a validator. Funds locked in ETH2 will not be available for withdrawal until the network finally moves from its current proof-of-work (PoW) mining model to PoS. The transition has a tentative 12-month timeline and is still on track for later this year. 

The Ethereum network has also finally implemented a burning mechanism, the EIP-1995 upgrade which allows for ETH to be burned as users pay for fees on the network. This milestone, as well as the rise of decentralized finance (DeFi) and non-fungible tokens (NFTs), have all contributed immensely to the increase in ETH price. 

If developments were to follow the same trajectory, then the price of becoming an Ethereum Validator would likely become even higher in USD terms in the coming years. How much will 32 ETH be worth eventually?

coinfomania.com