ETH PoS (also known as ETH 2.0 or Serenity), is the first upgrade to the existing Ethereum blockchain network. With the launch of ETH PoS, Ethereum will soon transit from the proof-of-work (PoW) algorithm to the proof-of-stake one(PoS). According to Ethereum official announcement, the upgrade will bring changes that will make it more scalable, secure and sustainable.
According to the full description of the Ethereum Foundation, ETH 1.0, also known as the Execution Layer, is where the actual smart contracts and network rules reside, while ETH PoS, known as the Consensus layer, is what ensures that devices contributing to the Network behave according to these rules.
The upgrade of ETH PoS from the Execution layer to the Consensus layer is divided into three main phases, named respectively: Beacon Chain, Merge and Sharding. Currently, the second phase is about to be completed. The merge is expected to be completed on September 2022. After the merge, Ethereum will switch from a PoW consensus mechanism to a PoS consensus mechanism.
The first upgrade, called Beacon Chain, launched on December 1st, 2020. The Beacon Chain brings native stake to the Ethereum blockchain, a key feature of the network’s move to a PoS consensus mechanism. As the name suggests, it is a blockchain independent of the Ethereum mainnet. The second phase, known as the Merge, is expected to merge the Beacon chain with the main Ethereum Network. The final stage is the Sharding, which will play a key role in scaling the Ethereum network.
This will be the final update to ETH PoS.
The full release of ETH PoS is not expected to happen until at least 2023, according to official disclosures. Initially scheduled for release in 2019, ETH PoS has experienced several delays during its development.
It is worth mentioning that the first phase of this Merge, called Bellatrix Upgrade was activated on September 6th. After the merging program will be activated, the overall difficulty of mining a block will be increased substantially, so when the Execution layer of the PoW chain will reach a certain difficulty threshold, it will be triggered and officially migrated to PoS. It is expected to occur between September 15th, 2022. The final date for this Terminal Total Difficulty (TTD) will depends on the workload proof hash rate.
vETH (Voucher Ethereum) is a staking derivative issued by Bifrost Finance for ETH PoS, and it is also the first derivative asset of the Bifrost vToken series. vETH has been launched in four phases:
- Phase 0: Mint Drop
- Phase 1: ETH PoS Staking
- Phase 2: Bifrost Mainnet
- Phase 3: ETH PoS Redemption
On December 1st, 2020, the ETH PoS Beacon chain staking was opened, and Bifrost launched the vETH function module on the Dapp, which supports users to participate in the staking of the ETH PoS Beacon chain through the Bifrost Dapp channel, and obtain Liquidity Derivatives vETH.
vETH was transitioning from Phase 0 to Phase 1 at the time.
Then, Bifrost launched two rounds of vETH Mint Drop activities at the by the end of 2020 and the beginning of 2021. Around 1,000 users participated in the operations, minting a total of 18,085.9735 vETH, for a cumulative amount of around 70 Million US dollars, and has already held users for vETH. The cumulative distribution of that period reached 809 ETH of income, nearly 3.5 million US dollars.
Bifrost also promoted the construction of vETH’s Liquidity pools, and launched vETH trading pairs on DEX such as Uniswap, 1inch, Loopring, and DODO. It’s worth mentioning that the cooperation with the latest protocols, Loopring and DODO, has expanded the application scenario of vETH to the so called Liquidity Mining: users who hold vETH can receive staking reward according to the token age, almost immediately.
After completing the ETH staking phase and the Bifrost mainnet launch, vETH entered the Polkadot parachain ecosystem through the Ethereum <-> Polkadot transfer bridge and became a Bifrost Substrate Base asset.At that time, vETH was used in both the Ethereum network and the Polkadot network as an ERC 20 and Substrate Base dual-chain asset.
When ETH PoS will be sharded, vETH will change into the ETH PoS Deposit certificate, which can be retrieved. Users will use the ETH PoS Deposit certificate to receive vETH back in ETH PoS.
In the process of ETH switching from PoW to PoS consensus, the original ETH PoS node validator needs to upgrade the client side to complete the ETH PoS merged block verification. Currently, the third-party Validator Providers entrusted by the Bifrost contract will complete the node client upgrade as soon as ETH PoS is merged to ensure the normal migration of the nodes entrusted by vETH and block production income.
Therefore, vETH holders can complete the migration of vETH from ETH PoW to ETH PoS without any operation. Users who want to know more about the process of entrusting a third-party Validator Provider with Bifrost contracts can refer to The Achievement of Decentralization From ETH to vETH.
“To minimize additional features that could delay this transition. Features, such as the ability to withdraw staked ETH, will experience a longer waiting time, after The Merge will be completed. Plans include a post-merge “cleanup” upgrade to address these features, which is expected to happen very soon after The Merge is completed.”
~ ETH Foundation
Shortly, after the merge, the staked ETH will not be redeemed.The ETH staking redemption function is still under discussion within the ETH Foundation, so after the merge of ETH PoS will be completed, vETH will not be open for the redemption function. Bifrost will follow up the latest progress of ETH staking redemption, and keep vETH able to connect and open the redemption function as soon as ETH PoS opens redemption.
At present, vETH can realize the two-way cross-chain between Ethereum and Moonriver through Anyswap (Multichain), and provide a fast and low Gas Fee transaction experienced in the Zenlink Moonriver version.Since there is currently no interoperable Ethereum <> Polkadot cross-chain bridge online, vETH is still far from the ideal vETH model in the roadmap planned by Bifrost.
However, Bifrost’s active promotion and development will realize the ideal vETH in the near future. For example, Bifrost is currently promoting the cooperation with the cross-chain interoperability bridge Snowfork to promote vETH to enter the second stage and become an ERC-20 and Substrate Base dual asset.
The second phase of vETH will have SLP protocol minting introduce new features such as liquidity aggregation, standardization and fast redemption.
Due to various factors such as Mint Drop subsidy, market sentiment, uncertain redemption time, and liquidity scale, the current vETH/ETH price usually fluctuates between 0.75 ETH ~ 0.85 ETH. Since the ETH redemption will not be opened immediately after the ETH PoS merge, the vETH discount rate will not be immediately wiped out by market arbitrage due to the 1:1 redemption opening, and the vETH/ETH price will still be 1:1. Due to the above factors, there is a certain offset. However, for long-term ETH staking holders, we still believe that buying discounted vETH and then waiting for a 1:1 redemption arbitrage may be a risk-controlled and profitable investment method.
Bifrost Finance is rooted in the Polkadot ecosystem and aims to provide liquidity solutions and basic protocols for staked assets. vETH will provide staking liquidity for ETH PoS moving to a PoS consensus mechanism. From the perspective of users, the staked derivatives protocol launched by Bifrost is easy to operate, releases liquidity, and has high returns.
Just convert ETH to vETH (Voucher Ethereum) to become a user and get staking reward by simply holding vETH. Users don’t have to wait for the one-year lock-up period during the ETH staking upgrade: they can sell vETH immediately and get their funds back.
At the same time, as a dual-protocol asset of ERC-20 and Substrate Base, vETH holders might not only enjoy the Staking liquidity benefits brought by vETH, but also cross-chain vETH into the Polkadot parachain ecosystem through the Ethereum <-> Polkadot transfer bridge, to discover even other parachain applications within the ecosystem.
That is to say, under the condition that the risk of lock-up is reduced, the income opportunities are increased, the yield rate is increased, and the investment scenarios and application scenarios are rich, which truly maximizes the income of staked assets for users.
Visit the Bifrost Dapp to learn more and mint vETH.
