- ConsenSys suggests in a publication that DeFi high yield opportunities might affect Ethereum 2.0 staking.
- Eth2 Phase 0 is expected to launch later this year.
Many people believe that decentralized finance (DeFi) is actually a good development on the Ethereum, as the boom in the market increased adoption and activities in the network. The Ethereum cryptocurrency, ETH, also gained huge points as a result. However, ConsenSys, a New York-based blockchain company, explained in a recent publication that decentralized finance might be a threat to the upcoming Ethereum 2.0 staking.
ConsenSys sees high yielding protocols as a threat to Eth2 staking
Notably, the development of a high yielding platform in the decentralized finance market provided Ethereum users with another viable option to earn high rewards from their ETH holdings. These protocols flaunted substantial returns, which attracted the attention of most crypto investors and traders. Following the promise of massive returns, the blockchain company says Ethereum investors might prefer to stake their cryptos in DeFi than for the upcoming Ethereum 2.0 staking event.
According to the ConsenSys Q3 DeFi Report, the staking is slated to begin after the Ethereum 2.0 Phase 0 is released. Hopefully, this particular Phase in Eth2 development is expected to be launched later this year. Although it won’t introduce any scaling improvements to the Ethereum network at the time, the blockchain company rather noted that it enabled the staking functionality for the network.
Ethereum 2.0 staking
So, Ether holders will be able to stake their cryptocurrencies (a minimum of 32 ETH) once the Phase 0 is released. Although the staking of ETH comes with a reward, the investors won’t be able to withdraw the staked cryptocurrencies, at least until the next Phase with the transfer function is launched. This Phase is scheduled for launch by next year.
Judging by this, decentralized finance participants might rather prefer to lock their ETH holdings in the high yielding protocols rather than in Eth2. The number one reason can be related to the profitability of both platforms. As DeFi offers high returns, many people would probably flock to it. Besides, the DeFi participants still maintain their ownership of cryptos and can withdraw them anytime. However, staked ETHs on Ethereum 2.0 are locked away for months and can’t be withdrawn until the next Phase (s) is launched.