What Does Ethereum’s Staking Record Signal for the Asset?

Not long after the U.S. Securities and Exchange Commission clarified its stance on staking, investors have dedicated a record amount of Ethereum to the network. The amount of Ethereum vowed toward validating network transactions crossed 35 million on Tuesday, an all-time high representing 28.3% of the asset’s circulating supply, according to a Dune control panel produced by Dragonfly Capital data researcher Hildebert Moulié. At the same time, the number of validators earning rewards reached 1.1 million– a new record. Liquid staking services exist, but the high water mark suggests conviction is growing for Ethereum, Carlos Guzman, a research analyst at crypto market maker GSR, told Decrypt. ‘It dovetails with market expectations around ETH turning more optimistic and positive,’ he said. ‘People are maybe anticipating the cost to go up in the future, and therefore feeling more confident in regards to holding the asset.’ Late last month, Wall Street’s top police officer stated in a statement that it does not see staking activities as securities transactions, noting that an absence of clarity ‘synthetically constrained involvement in network consensus and undermined the decentralization […] of proof-of-stake blockchains.’ Although previous SEC Chair Gary Gensler posited in 2022 that proof-of-stake assets might themselves be securities, the statement signified people and institutions could get involved, as asset managers seek to incorporate staking rewards into exchange-traded funds. Liquid staking protocols, such as Lido, enable a user to secure their Ethereum, in exchange for a token pegged to the asset’s rate, while still having the ability to earn benefits. Crypto asset manager Galaxy Digital said on Tuesday that it would work to bring staking to institutional investors. Ethereum was recently changing hands around $2,500, a 5.4% decline over the previous day, according to crypto data company CoinGecko. Since Tuesday, the amount of Ethereum staked is worth $90 billion, based on current prices. In practice, the amount of Ethereum staked affects the asset’s issuance, or the rate at which new Ethereum is created. As more Ethereum is staked, the asset’s issuance increases at a diminishing rate, according to business development firm Etherealize. ‘Even in an extreme hypothetical circumstance– where the entire circulating ETH supply […] is staked and no ETH is burned through network usage– the maximum possible inflation rate is capped at 1.51%,’ the company stated in a recent research study report. Unlike Bitcoin, where computers continuously crunch complex calculations to compete for fresh coins, Ethereum relies on validators that have locked up capital in exchange for the opportunity to participate in the process of verifying transactions, since the so-called Merge in 2022. Although it’s a relatively small amount, SharpLink Gaming, an online betting marketer, said last week that it had deployed Ethereum in staking and liquid staking services as part of its corporate treasury strategy, totaling around 167,000 Ethereum worth roughly $418 million.

Liquid staking protocols, such as Lido, enable a user to lock up their Ethereum, in exchange for a token pegged to the asset’s rate, while still being able to earn benefits. In practice, the amount of Ethereum staked affects the asset’s issuance, or the rate at which new Ethereum is created. As more Ethereum is staked, the asset’s issuance increases at a diminishing rate, according to business development firm Etherealize. It’s a relatively small amount, SharpLink Gaming, an online gambling marketer, said last week that it had deployed Ethereum in staking and liquid staking services as part of its corporate treasury strategy, totaling around 167,000 Ethereum worth approximately $418 million.