With Ethereum's 2.0 Phase 0 launch, I think it's the right time to start talking about running a validator as your main investment vehicule in crypto.
But first, let's cover a bit more the background here. I'm pretty young, and I'm insanely bullish on ETH, and Ethereum in general. In fact, I'm so bullish on it, that I'm willing to lock-up nearly all the gains I have made in my 3 modest years in crypto, to be able to run an Ethereum validator for the next 10 years. It's a risky bet. Very risky actually. But I'm confident that this will allow me to become much earlier financially independent than 99% of most people do, which is around 65 years old.
To be able to run a validator, you need 32 ether. This is, at the time of writing this, already a decent amount of money. Some may ask me why would running a validator be better than, simply lending it through a lending marketplace like Aave or Compound. The reason is pretty simple. Aave and Compound are simply start-ups trying to leverage the financial capabilities of Ethereum. That's all, nothing more. But by lending money on Aave or Compound, you are taking quite a lot of risks. First, you are taking a risk regarding Ethereum. No one knows what can happen in the future with it. Second, you are taking a big risk regarding the platform itself, Aave or Compound in this case. Third, you are taking a big risk regarding the cryptocurrency you are using to lend money. And finally, this is not a risk, but you are paying a fee to the tokenholders of LEND or COMP. To summarize, there are 3 pretty major risks, and one very annoying problem.
So there are quite a few reasons why you would not want to use a lending marketplace as your primary investment vehicule in the cryptocurrency world for something you want to hold for the next 10 years.
Running a validator has a few advantages. First, you are actively supporting the network you are bullish on. Second, you generate revenues on a daily basis. I'm pretty sure some people will even be able to live without working thanks to their validators. Third, once its setup, there is not a lot to do. In the beginning, you may struggle a bit with setting up the servers, but once it's running, it's running. And finally, there is no fee, you are actually the one charging the fee. However, there is a certain fee (which can be substantial), in the sense that you will likely need to pay for servers to be able to run the validator, unless you have a supercomputer at home of course.
Let's cover the economic aspects of running a validator.
With 100m ether staked, validators will be earning around 1.88% on a yearly basis. If less is staked, they will earn more. I'm guessing on a 10-year period, on average, validators will be making around 2.25% yearly returns on their staked ETH.
2.25% yearly, that's 24.92% or nearly 25% of returns on a 10-year period. 25% may seem like something pretty little to you, I can guarantee you it's gigantic. Where I live, banks will give you a 0.11% interest on a yearly basis. On a 10-year period, that's only 1.1% of returns.
But let's not forget that on top of that, I'm insanely bullish on ETH. Let's speculate a bit here, by saying that ETH will 50x in the 10 following years. Running an ETH validator currently costs around 12800$, so assuming ETH indeed 50x's in 10 years, that means you will have around 640000$ by then. But wait! You still have 25% on top of that which you gained through the interest. This makes it 800000$. You literally 62.5x'ed in 10 years time, while the market in general "only" 50x'ed.
Now as I'm pretty young as I said earlier in this blog post, I don't have 12800$ laying under my bed. However, I have little bag of ETH I will be staking, along with people I know. And together, we will have enough to cover all the 32 ETH necessary to create the validator.
So no excuses guys. Even if you don't have as much as 32 ETH to stake, you can always form groups with other people. Because together, you are stronger.