The Ethereum Merge Can Make You Passive Income

4 Min Read

What is the Ethereum merge?

Short and sweet its ETH 2.0. The end of proof of work (eth mining) as a method of verifying transactions and the transition into proof of stake (validator nodes). This eliminates the need for energy-intensive mining and instead secures the Ethereum network using staked ETH.

Impacts Of The Ethereum Merge

  • The Merge will reduce Ethereum’s energy consumption by ~99.95 (making it 35x more energy efficient than Visa transactions)
  • Significantly improve scalability
  • Sets in motion the road to sharding (more on this later)
  • Forecasted 50% increase in staking rewards for validators
Roadmap Of Ethereum Upgrades

How To Earn Passive Income From The Merge

Staking is where a user deposits 32 ETH to activate validator software. As a validator is responsible for storing data, processing transactions, and adding new blocks to the blockchain. This will keep Ethereum secure for everyone and earn you new ETH in the process for providing that service. This process, known as proof-of-stake and has been introduced by the Beacon Chain.

There are various methods of staking such as at home (full control over everything) or even an option where you don’t need the full 32 eth and can stake into a pool. here are the different methods along with guides from the Ethereum foundation staking page

Rewards

Currently APR (Annual Percentage Rate) is ~4.1% rewarded in ETH, this is regardless of the price of Ethereum whether that’s $1k a coin or $10k a coin! I’m sure you’re starting to see why this is an incredible opportunity. This is projected to climb to approximately 6.15% after the merge. Currently stakers are locked into staking and cannot withdraw anything however this will change after the merge and no stakers can’t withdraw all their eth causing a crash as there’s limits for security reasons.  full validator exits are rate limited by the protocol

  • only six validators may exit per epoch (every 6.4 minutes, so 1350 per day, or only ~43,200 ETH per day out of over 10 million ETH staked).
  • This rate limit adjusts depending on the total ETH staked and prevents a mass exodus of funds. Furthermore
  • prevents a potential attacker from using their stake to commit a slashable offense and exiting their entire staking balance in the same epoch before the protocol can enforce the slashing penalty.

What Comes After The Merge?

Sharding should launch sometime in 2023. The most exciting part to most about sharding is that it should result in lower gas fees! Sharding is where a database is split horizontally to spread help the load. Sharding will work synergistically with layer 2 rollups by splitting up the burden of handling the large amount of data needed by rollups over the entire network. This will continue to reduce network congestion and increase transactions per second to a predicted maximum of 100,000 transactions/second, currently Ethereum can only handle about 15 per second.

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