Use the upcoming Merge of Ethereum to Proof-of-Stake to instantly own 3% more ETH
So I am going to be straight with you: I do not know if I am missing something here. To me, this seems an easy gain in ETH. If you see this any different, please let me know.
By now, I think most of you will have heard about the upcoming ETH2.0 merge. While this merge has been postponed many times, it may just happen this time. Some estimate the merge to be happening some time mid-September.
The main change will be that Ethereum moves from a proof-of-work blockchain to a proof-of-stake blockchain. What that means is that new ETH does not have to be mined. Rather ETH is going to be distributed to validators who secure the blockchain.
As a small to mid-cap investor, you can earn your share by delegating your ETH to these validators.
In order to support development and adoption of the new ETH2.0 merge there was a staking contract created in which people could stake their ETH and earn interest on their stake.
The catch: The staked ETH could only every be redeemed on the new ETH2.0 blockchain. So your funds are locked until the merge actually takes place. And there is also another catch: The minimum stake is 32 ETH. So unless you have more than $40,000 lying around, it will be hard for you (or me) to take part.
Well, in order to avoid this “minimum deposit” of 32 ETH, you could, in theory come together with a lot of people and pool all your ETH until you have the required mimium of 32. That would take a lot of trust from all parties involved.
However, there are huge players in the crypto space who offer exactly this kind of pooling. I actually took part in ETH2.0 staking on Binance already a while ago.
What you do is you stake your ETH on a 1:1 basis. You receive BETH in return. Those BETH tokens represent your share in the shared staking pool from Binance. And there is one benefit that is actually quite amazing: You can trade your BETH back to ETH on the regular spot market on Binance.
This is then called liquid staking. There are DeFi protocols offering the same functionality. For instance Lido DAO. That token has been gaining traction lately as it is poised to profit from the upcoming merge. See What is Lido for more information.
All good and well, but how do I earn my instant 3% on my ETH? Here we go! Staking your ETH with Binance gives you a great way to “opt-out” of ETH2.0 staking if you no longer want to take part. So instead of locking your funds until the merge happens, you can get out earlier.
But this is the catch. This creates a huge selling pressure on the BETH token. So right now, the BETH token trades lower than ETH. 1 BETH is currently worth around 0.97 ETH. Because people use it to get out. But as per agreement, your BETH token will be redeemed on a 1:1 basis once the merge is complete.
So think about it: You can get your BETH tokens at a discount, and once the merge happens, you will get 1 ETH (2.0) for 1 BETH.
Example: you buy 10 BETH now, which will cost you somewhere around 9.7 ETH. Once the merge happens, you can redeem 10 ETH again. In this crazy world, around 9.7 ETH = 10 ETH (2.0). Am I missing something? Well, there are some risks…
The obvious risk here would be that the merge never happens. But more and more sources now point towards the merge happening some time in mid-September. So if you believe this merge is going to happen, I think this trade is for you.
And then you have the usual risks:
- ETH2.0 could have bugs, which could result in the loss of funds.
- Since you hold your funds on Binance, all the risks apply to storing your crypto on centralized exchanges.
So I executed the trade. I paid 1.1697543 ETH in order to get 1.2078 BETH. On top of that, those BETH tokens will now start to earn interest for me.
You can register to Binance using my referral link. That would help me out a lot. With this link, you and I will get 10% off of trading fees, which are very low with Binance as it is. Register on Binance through my link.
You can also help me out by following me if you find what I write is of value to you. I also started my journey to finally own one full bitcoin, which you can follow here: https://medium.com/road-to-one-full-bitcoin and on Instagram @road_to_one_bitcoin 🙂
Thank you for taking the time to read my story. It means a whole lot to me as I know how much time is worth. I hope you have a great day!
