Vitalik Buterin wants higher Staking rewards for Ethereum’s POS Algorithm

Vitalik Buterin, Creator of Ethereum has proposed a higher staking reward for Ethereum’s Proof of Stake algorithm.

Vitalik recently posted a proposal on Github to increase the staking rewards (amount of Ether paid out in return for staking) for the upcoming ETH Proof Of Stake (POS) algorithm:

“An issuance increase is proposed based on community feedback, to 2**21 ETH if 2**27 ETH is validating, along with an agreement to set the base reward quotient based on a pre-set max issuance bound once all protocol details are finalized.”

He shared a chart estimating the annual return rate in Ether for different amounts of validating ETH:

Justin Drake, one of the key researchers at the Ethereum Foundation commented on Vitalik’s post:

“Targeting 2^25 ETH at stake (~32m ETH) for the long term feels about right for strong security. In such conditions, the base inflation would be ~1% and the base return ~%3.2%. Assuming each shard consumes on average 1,000 ETH in gas per year (about 100x less than what Eth1 consumes today), with half of the gas burnt, then inflation would be ~0.5% and the validator return ~5%. Feels healthy!

If we get significantly less than 2^25 ETH at stake then doubling the base inflation wouldn’t be unreasonable :)”

Staking is a key feature of the Proof of Stake consensus algorithm, similar to mining in Proof of Work, transactions are validated by nodes staking coins. Ethereum’s roadmap indicates that the network will switch to POS in the next 16 months.

The recent development was well received in the Reddit and Twitter community which was previously critical of the staking rewards, as Justin points out the base inflation would be around 1% and base return 3.2% which seems reasonable. The returns decrease based on the supply of the ETH that is locked in which ensures a healthy economy in the staking rewards.

As more Blockchains like Tezos, Cardano and Ethereum are adopting Proof of Stake, staking services are gaining momentum. Just like the enormous mining industry in Bitcoin-like coins staking could be a major industry going forward.

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