Almost70%ofinstitutionalinvestorsinEthereum(ETH)areparticipatinginETHstaking,with60.6%ofthemusingthird-partystakingplatforms.
EthereumStakingLandscapeAtAGlance
AccordingtoareportbyBlockworksResearch,69.2%ofinstitutionalinvestorsholdingEthereumareengagedinstakingtheplatform’snativeETHtoken.Ofthese,78.8%areinvestmentfirmsandassetmanagers.
Notably,slightlymorethanoneoutoffiveinstitutionalinvestors–or22.6%–oftherespondentssaidthatETHoranETH-basedliquidstakingtoken(LST)constitutesmorethan60%oftheirtotalportfolioallocation.
ThereportnotesaseismictransformationintheEthereumstakinglandscapesincethenetworktransitionedfromaproof-of-work(PoW)toproof-of-stake(PoS)consensusmechanismduringtheMergeupgrade.
Atpresent,therearecloseto1.1millionon-chainvalidatorsstaking34.8millionETHonthenetwork.FollowingtheMerge,EthereumnetworkparticipantswereallowedtowithdrawtheirETHonlyaftertheShapellaupgradeinApril2023.
AftertheinitialphaseofETHwithdrawals,thenetworkhasseensteadyinflows,indicatingstrongdemandforETHstaking.Atpresent,28.9%ofthetotalETHsupplyisstaked,makingitthenetworkwiththehighestdollarvalueofstakedassets,valuedatover$115billion.
It’sworthnotingthattheannualizedyieldfromstakingETHisaround3%.AsmoreETHisstaked,theyielddecreasesproportionally.However,networkvalidatorscanalsoearnadditionalETHthroughprioritytransactionfeesduringperiodsofhighnetworkactivity.
Third-PartyStakingOvershadowsSoloStaking
AnyonecanparticipateinETHstaking,eitherasasolostakerorbydelegatingtheirETHtoathird-partystakingplatform.WhilesolostakinggivesthestakerfullcontrolovertheirETH,itcomeswithahighentrybarrierofstakingatleast32ETH–worthmorethan$83,000atcurrentmarketpriceof$2,616.
Conversely,holderscanstakewithaslittleas0.1ETHthroughthird-partystakersbutmustgiveuponsomedegreeofcontrolovertheirassets.Recently,Ethereumco-founderVitalikButerinstressedtheneedtolowerentryrequirementsforETHsolostakerstoensuregreaternetworkdecentralization.
Currently,about18.7%ofstakersaresolostakers.However,thetrendshowsthatsolostakingislosingpopularityduetothehighentrythresholdandtheinefficiencyoflockedcapital.Thereportexplains:
Oncelockedinstaking,ETHcannolongerbeusedforotherfinancialactivitiesthroughouttheDeFiecosystem.ThismeansthatonecannolongerprovideliquiditytoavarietyofDeFiprimitives,orcollateralizeone’sETHtotakeoutloansagainstit.Thispresentsanopportunitycostforsolostakers,whomustalsoaccountforthedynamicnetworkrewardratesofstakedETHtoensuretheyaremaximizingtheirrisk-adjustedyieldpotential.
Asaresult,third-partystakingsolutionsarebecomingmorepopularamongETHstakers.However,suchplatforms–dominatedbycentralizedexchangesandliquidstakingprotocols–raiseconcernsaboutnetworkcentralization.
Closeto48.6%ofETHstakersleveragingthird-partystakingplatformsareusingjustoneintegratedplatformsuchasCoinbase,Binance,Kiln,andothers.
Thereporthighlightskeyfactorsdrivinginstitutionalinvestorstousethird-partyplatforms,includingplatformreputation,supportednetworks,pricing,easeofonboarding,competitivecosts,andplatformexpertise.
AlthoughtheEthereumstakingecosystemisevolving,thisgrowthhasnotyetbeenreflectedinETH’sprice.ETHhassignificantlyunderperformedagainstBTCforanextendedperiod,onlyrecentlygainingtractionaftertheUSFederalReserve’s(Fed)decisiontocutinterestrates.
Nonetheless,somecryptoresearchfirmsremainoptimisticaboutETH’spotentialcomebackagainstBTClaterthisyear.Asofpresstime,ETHistradingat$2,616,up0.8%inthepast24hours.
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