Ethereum 2.0 & Proof-of-stake
Ethereum 2.0, or Eth2, is an upgrade to the Ethereum network. By migrating Ethereum from the current proof-of-work network to a new proof-of-stake blockchain, Eth2 aims to increase scalability and reduce energy consumption.
As a proof-of-stake blockchain, the Eth2 Beacon Chain is built and secured by the network's validators. To participate as a Beacon Chain validator, you must stake ETH by sending it to a deposit contract on the Ethereum network.
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Understand that, unlike regular proof-of-stake protocol, staked ETH and ETH staking rewards will be locked until the Ethereum 2.0 network upgrade is complete. This transition is expected to evolve over multiple “phases” and may take several years to complete, or may never be completed. Kraken has no control whatsoever over this process. In the event the Eth2 network upgrade is delayed or cannot be completed, you may be unable to access, withdraw, or transfer your assets on-chain indefinitely.
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Staking ETH to support the Eth2 Beacon Chain and earn Rewards
When you stake through Kraken, we will credit your account with staked ETH and the applicable staking rewards consistent with our Terms and the rules of the Ethereum network. These rewards are visible in the Staking page underneath the Total rewards column.
Reward rates are currently estimated between 5% and 7% annually (RPY), but rewards will vary according to the rules of the Ethereum protocol.
Kraken retains an administrative fee of 15% on all rewards received, and the estimated RPY reflects this fee. The reward rate provided by the Ethereum network is expected to vary depending on a variety of factors.
As described below, your user dashboard will assign different ticker symbols to the ETH in your account to designate its status within the Ethereum ecosystem (i.e., un-staked ETH, staked ETH, and ETH earned as staking rewards).
The Ethereum 2.0 network imposes an activation period on new validator nodes, which may cause a delay in distributing ETH staking rewards. To ensure staking rewards are distributed fairly, newly staked ETH will undergo an up to 12 hour bonding period before it will start earning ETH2 rewards. After the bonding period has elapsed, staking rewards will begin to accrue.
What is the meaning of the ETH, ETH2.S and ETH2 ticker symbols on Kraken?
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ETH |
The ETH ticker on Kraken represents “regular” ETH: ETH on the Ethereum blockchain that has neither been staked nor earned as staking rewards. It can be staked, deposited, traded and withdrawn. |
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ETH2.S |
The ETH2.S ticker on Kraken represents ETH that has been staked to support the Eth2 network upgrade. Clients that are not located in or citizens or residents of the US or Canada may transact on Kraken’s ETH2.S/ETH market when that market is made available. Otherwise, ETH2.S cannot be un-staked, deposited, or withdrawn. |
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ETH2 |
The ETH2 ticker on Kraken represents ETH that is earned as staking rewards through Eth2 staking. ETH2 cannot be staked, deposited, traded or withdrawn. |
What is the ETH2.S/ETH market on Kraken?
Kraken’s ETH2.S/ETH market allows eligible clients to buy into (and sell out of) staking positions on the Ethereum network. It functions in the same manner as any other order book on Kraken, except that instead of trading one asset for another, on the ETH2.S/ETH market clients trade un-staked ETH for staked ETH. The differential between the two types of ETH can be expected to reflect a discount on ETH that is staked and locked in the Ethereum protocol generating staking rewards versus ETH that is not staked and freely transferable.
Two important caveats about the ETH2.S/ETH market:
- The market will NOT be available for users located in or residents or citizens of the US and Canada (these clients can stake ETH, but not trade their staked ETH for unstaked ETH).
- We offer no guarantees of any kind about the continued availability or liquidity of this market - price slippage in market orders should be expected and it may be difficult to exchange staked ETH for unstaked ETH in large amounts, and this market may not be available for the duration of the Ethereum 2.0 transition.
Note that staking ETH also impacts your equity for margin trading, because it is a collateral currency and will be removed from your trading and equity balances while staked.