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Breaking News: FTX Recovery Trust Set To Disburse $1.6 Billion By Month-End, FTT Price Skyrockets

Survey Finds Almost 70% Of Ethereum Institutional Investors Engaged In ETH Staking

Ash Tiwari
Ash Tiwari
11 months ago
3 mins read
Ethereum

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Almost 70% of institutional investors in Ethereum (ETH) are participating in ETH staking, with 60.6% of them using third-party staking platforms.

Ethereum Staking Landscape At A Glance

According to a report by Blockworks Research, 69.2% of institutional investors holding Ethereum are engaged in staking the platform’s native ETH token. Of these, 78.8% are investment firms and asset managers.

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Notably, slightly more than one out of five institutional investors – or 22.6% – of the respondents said that ETH or an ETH-based liquid staking token (LST) constitutes more than 60% of their total portfolio allocation.

The report notes a seismic transformation in the Ethereum staking landscape since the network transitioned from a proof-of-work (PoW) to proof-of-stake (PoS) consensus mechanism during the Merge upgrade.

At present, there are close to 1.1 million on-chain validators staking 34.8 million ETH on the network. Following the Merge, Ethereum network participants were allowed to withdraw their ETH only after the Shapella upgrade in April 2023.

ETH
Source: Blockworks Research

After the initial phase of ETH withdrawals, the network has seen steady inflows, indicating strong demand for ETH staking. At present, 28.9% of the total ETH supply is staked, making it the network with the highest dollar value of staked assets, valued at over $115 billion.

It’s worth noting that the annualized yield from staking ETH is around 3%. As more ETH is staked, the yield decreases proportionally. However, network validators can also earn additional ETH through priority transaction fees during periods of high network activity.

Third-Party Staking Overshadows Solo Staking

Anyone can participate in ETH staking, either as a solo staker or by delegating their ETH to a third-party staking platform. While solo staking gives the staker full control over their ETH, it comes with a high entry barrier of staking at least 32 ETH – worth more than $83,000 at current market price of $2,616.

Conversely, holders can stake with as little as 0.1 ETH through third-party stakers but must give up on some degree of control over their assets. Recently, Ethereum co-founder Vitalik Buterin stressed the need to lower entry requirements for ETH solo stakers to ensure greater network decentralization.

Currently, about 18.7% of stakers are solo stakers. However, the trend shows that solo staking is losing popularity due to the high entry threshold and the inefficiency of locked capital. The report explains:

Once locked in staking, ETH can no longer be used for other financial activities throughout the DeFi ecosystem. This means that one can no longer provide liquidity to a variety of DeFi primitives, or collateralize one’s ETH to take out loans against it. This presents an opportunity cost for solo stakers, who must also account for the dynamic network reward rates of staked ETH to ensure they are maximizing their risk-adjusted yield potential.

As a result, third-party staking solutions are becoming more popular among ETH stakers. However, such platforms – dominated by centralized exchanges and liquid staking protocols – raise concerns about network centralization.

Close to 48.6% of ETH stakers leveraging third-party staking platforms are using just one integrated platform such as Coinbase, Binance, Kiln, and others. 

The report highlights key factors driving institutional investors to use third-party platforms, including platform reputation, supported networks, pricing, ease of onboarding, competitive costs, and platform expertise.

Related Reading

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Bitwise CIO Calls Ethereum The ‘Microsoft Of Blockchains’, Can ETH Make A Comeback?

1 year ago

Although the Ethereum staking ecosystem is evolving, this growth has not yet been reflected in ETH’s price. ETH has significantly underperformed against BTC for an extended period, only recently gaining traction after the US Federal Reserve’s (Fed) decision to cut interest rates.

Nonetheless, some crypto research firms remain optimistic about ETH’s potential comeback against BTC later this year. As of press time, ETH is trading at $2,616, up 0.8% in the past 24 hours.

ethereum
ETH trades at $2,616 on the daily chart | Source: ETHUSDT on TradingView.com
Featured image from Unsplash, Charts from Blockworks Research and Tradingview.com
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Ash Tiwari
Ash Tiwari

Ash Tiwari

Ash is a dedicated crypto researcher and blockchain enthusiast with a passion for diving deep into the evolving world of decentralized technologies. With a background in writing and a natural curiosity for how digital assets are shaping the future, he has immersed himself in various sectors of the cryptocurrency space, including decentralized finance (DeFi), NFTs, and liquidity mining. His journey into crypto started with a desire to fully understand the technology behind it, leading him to explore and engage with these systems firsthand.

Read more

Ash’s approach to DeFi goes beyond surface-level research as he actively participates in decentralized protocols, testing their functionality to gain a deeper understanding of how they operate. From experimenting with staking mechanisms to exploring liquidity mining strategies, he is hands-on in his exploration, which allows him to provide practical, real-world insights that go far beyond theoretical knowledge. This immersive experience has helped him develop a comprehensive grasp of smart contracts, token governance, and the broader implications of decentralized platforms on the future of finance.

In the NFT space, Ash’s interest is driven by the technology’s potential to reshape ownership and creativity in the digital age. He has explored various NFT projects, gaining insights into how these digital assets function within different ecosystems. His focus is on understanding the evolving relationship between creators and communities, as well as the innovative uses of blockchain technology to establish authenticity and provenance in the digital world. Ash’s research in this area often touches on the intersection of culture, technology, and community-driven projects.

A key area of his expertise lies in liquidity mining, where he has engaged with various decentralized platforms to understand how liquidity provision contributes to the functionality and security of DeFi ecosystems. Ash’s hands-on involvement has allowed him to analyze the risks, rewards, and broader implications of liquidity pools, giving him a well-rounded perspective on this integral part of DeFi. His understanding of risk management and protocol design allows him to provide insights into how these systems can be navigated effectively, with an emphasis on both opportunity and caution.

When it comes to communicating these complex topics, Ash’s writing is grounded in clarity and depth. He excels at breaking down intricate blockchain concepts into easily digestible information for a wide audience. Whether explaining the workings of decentralized exchanges or outlining the future potential of blockchain technology, Ash ensures that his content is accessible to both those new to the space and experienced participants looking for deeper insights.

Beyond DeFi and NFTs, Ash explores a wide array of emerging blockchain applications. His research spans areas like cross-chain technologies, decentralized governance, and blockchain’s potential to integrate with traditional finance. He is continuously learning and adapting to the latest developments, ensuring that his insights are both timely and relevant. His interest extends to how these technologies are creating new possibilities for decentralization, transparency, and trust in a variety of industries.

Ash’s commitment to engaging with the crypto space firsthand gives him a unique perspective that goes beyond what can be learned from research alone. His practical involvement allows him to stay ahead of the curve, offering readers and enthusiasts a clear and comprehensive understanding of the rapidly evolving world of blockchain. Whether delving into the technical mechanics of DeFi or exploring the cultural impact of NFTs, Ash’s approach is always rooted in curiosity, research, and a desire to make this technology accessible to all.

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