Blockchain data analysis carried out by Nansen highlights the increasing amount of Ether (ETH) that has been locked up via various staking solutions in the months since Ethereum’s switch to proof-of-stake consensus. (PoS).
The long-awaited update has been a boon for decentralized finance (DeFi) in general, and staking solutions have been in high demand since Ethereum’s switch to PoS. This is based on data from a variety of staking solutions across the Ethereum ecosystem.
Nansen’s report highlights the impact of The Merge in introducing locked-up ETH as a native cryptocurrency performance instrument that has quickly outperformed other collateralized performance services.
Automated market makers like Uniswap and other liquidity providers remain popular, but they pale in comparison to the total value locked in ETH locked solutions. More than 15.4 million ETH is locked in the Ethereum staking contract, which puts the total ETH locked in the top six cryptocurrencies by market capitalization:
“Locked ETH is thus the first performing instrument to reach significant scale in DeFi, and has the potential to both grow significantly and radically transform the ecosystem in the coming years.”
Nansen provides some interesting insights from the derivatives data with liquid staking solutions. When Ethereum moved to PoS, miners were replaced by validators who had to deposit or lock 32 ETH to propose new blocks and earn protocol rewards. Users who are unable or unwilling to stake 32 ETH can participate in pooled staking, also known as liquid staking. This also allows users to withdraw the locked ETH at any time.
Nansen’s metrics reveal that liquid staking holdings are leaning towards long-term incumbents, while recently launched protocols are attracting new deposits faster than established services. 5.7 million of the total 14.5 million ETH are locked in staking pools such as Lido and Rocket Pool, which is more than 40% of the total ETH locked in the ecosystem.
Lido’s staked Ether (stETH) pool dominates the space with a 79% share of the total locked ETH market supply. 52% of stETH tokens are in Aave, Curve, and Lido wrapped stETH contract, indicating interest and utility for investors and DeFi applications. stETH has also seen a 127% increase in average daily trading volume since The Ethereum Merge.
Meanwhile, the staking pools belonging to Rocket Pool (rETH) and Coinbase (cbETH) are the ones that have grown the most in the last three months, with 52.5% and 43.3%, respectively. Coinbase’s cbETH has outperformed all other assets besides stETH in supply, despite only launching in August 2022.
The growth of Coinbase’s ETH staking option also suggests that everyday users still trust centralized entities and are content to earn return on their locked ETH rather than more complex, return-generating, on-chain strategies.
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