Will Coinbase support Ethereum staking? If yes then Ethereum will easily become the most attractive asset to hold
Ethereum switching to Casper will need Coinbase to support it
In my opinion a make or break feature for Ethereum (and for speculators) will be whether or not Coinbase will pay the interest and allow staking. Now before people say "but this violates the whole point" and these people are right because Coinbase in a way is centralized, I do think there is a way to do it where control of the private key is with the owner. Vitalik recently mentioned it will be possible to stake Ether using a cold wallet.
Watch the video from Vitalik for some details:
Casper FFG will be the first iteration of this transition to proof of stake. According to the developers the interest will be between 0-5% a year (unofficial). In my opinion this is fairly low but it is enough that some people will do if it's above 5%. The reason being, there are stocks which pay interest above 5% with lower risk and maintenance cost than to hold Ethereum. On the other hand if the price of Ethereum is going up at over 20% per year (most stocks don't grow this fast) then it does make a lot of sense to take 5% interest if you can be sure your principal is growing in dollar value.
Coinbase is perfectly positioned here
If Coinbase were to offer to let users stake their Ethereum for a very small fee each time the users cash out then Coinbase can win big time. This would encourage more people to buy Ethereum and hold it in Coinbase. It being held in Coinbase and gaining interest means there will be people who will eventually sell Ether to spend the interest which Coinbase can take a fee from without touching the principal. Coinbase could position themselves as Google currently is, which is the most trusted regulated exchange in the United States where most Ethereum stakers go to stake their crypto.
Users don't want to worry about how to keep the computer online and probably would look to outsource it to others. Users in theory who outsource it to Coinbase will have to trust Coinbase to keep the computer up and running on their behalf. Important to note also is that tax compliance can be made effortless if Coinbase allows users to do it this way but it is questionable whether or not staking interest will get the dividend tax rate or the income tax rate (this distinction matters for cost benefit analysis).
A very useful explanation, by reading it will be able to take the next step. @dana-edwards
it would be a great feature.
They can't stake that ETH because their users may want to pull it out. Staking it means that you make it unavailable for use, and if you try to break the rules while staking you lose it.
They could probably stake some of it though, as long as there's no bank run situation.
If there was even a hint that Coinbase was pulling any "fractional reserve" stunts, they'd lose the massive amount of credibility they have over less reputable exchanges. Reputation is the primary advantage Coinbase has.
When you stake you get interest in ETH. So why would you have to ever sell the "principal" once you have enough of the "stock"?
To listen to the audio version of this article click on the play image.
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I doubt Coinbase will pay interest for a few reasons:
Minimum amount to stake is 1,500 Eth, nearly USD-equivalent of $1 million. Folks with that much Ether probably can figure out how to stake it themselves or find someone besides a centralized, hackable exchange to do it.
Coinbase probably will not be permitted to "pool" Ether of many users to reach that 1,500 Eth threshold. Coinbase is a money transmitter already subject to strict state-based regulations, and they're looking to become an exchange subject to federal regulations. As a money transmitter, they would not be permitted to pool and pledge user funds.
"Unstaking" will take four months. "Stakers do not lose their money, but the ether used to stake will get locked, meaning that they cannot access it for around 130 days. After that, it can be freely used once again. This acts as a means of preventing people from fraudulently flooding the system and trying to damage it." https://cryptodisrupt.com/details-about-ethereums-huge-update-have-been-released/ Most won't want to lock their funds in a volatile crypto for four months given the risk of collapse.
And, this latter is the answer to the question you pose below, restated here: "So why would you have to ever sell the "principal" once you have enough of the "stock"?"
Because this "stock" is hugely volatile. In exchange for between 0% - 5% interest (very little), why would you agree to lock up your funds for four months, preventing you from selling when, say, it's discovered that there's a major flaw with sharding or Casper or another hard fork is imminent? That's why you don't stake and that's why you would sell the stock.
Where did you hear that the minimum is 1500 ETH? That could end up being any amount in USD so is this set in stone or dynamic? I haven't seen that number anywhere.
I also would not assume people with a lot of ETH have technical expertise. A lot of people can buy 1000+ ETH on Coinbase and not know how to launch a smart contract or deal with the very hard to use Ethereum Wallet. I would say this creates a market for pools and because these pools will for sure exist I do not see why Coinbase would not take advantage or form a partnership with one of these pools.
We will have to wait and see but if they don't then it's a huge loss of potential users who could then go to another exchange which does allow staking.
Follow the link in my initial post. The 1,500 Eth minimum is at many sites, including some that are direct quotes from Buterin, such as this one: https://www.ethnews.com/vitalik-buterins-five-steps-to-becoming-a-casper-validator (hint: read Step 3)
I didn't assume that all folks with Eth have technical expertise. Here's what I said: "Folks with that much Ether probably can figure out how to stake it themselves or find someone besides a centralized, hackable exchange to do it."
In terms of pools: Possibly. But, again, go back to my original post. Coinbase can't be a pool operator because they are a money transmitter and are forbidden from doing that. Someone not legally organized in the USA could. Coinbase can't. Plus, Coinbase wouldn't because they are attempting to become a licensed exchange. It would be like NASDAQ creating its own S&P 500 fund to sponsor. They can't do that.
I do agree the interest levels are crappy considering the amount of risk but if someone is going to hold anyway there is a penalty for holding. Meaning if you don't stake you are guaranteed to lose some percentage of your value each year in terms of percentage of Ethers.
I agree with this, this will yield massive turnover for coinbase as more investors want to buy ETH inside coinbase
If coinbase can be regulated then the potential of ETH growing even higher is very expected especially when it has been upgraded to casper
I would like to hope so but idk if they will honestly it would be another level of tracking and paying to their thousands of customers who hold it
Definitely it will encourage more people to purchase ethereum, this I totally agree with you. Only if coin base would take the chance now and ethereum upgrades to Casper.
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I'm just looking to establish a position in the Steemit community, and would appreciate to find some people like me, so we can mutually support one another. subscribe @coinlocket