The carbon footprint of the Ethereum blockchain is expected to be reduced by 99% following last week’s Merge event. By positioning staking as a service for retail and institutional investors, the upgrade could also have a significant impact on the crypto economy, according to a new report from Bitwise.
The company said it projects potential gains of 4% to 8% for long-term investors through Ether (ETH) staking, while JP Morgan analysts forecast that staking returns through PoS networks could double to $40 billion by 2025.
Users who stake crypto assets earn rewards – known as returns – from transaction fees paid by other users on the network. Viewed by some as a way to generate passive income, staking requires users to lock their assets into a smart contract, during which coins cannot be spent or sold on the market. This can be one of the main challenges for the adoption of PoS networks, especially by institutional investors.
On a second-quarter earnings call, Coinbase CEO Alesia Haas noted that institutional staking of crypto assets could be a “phenomenon” in the future, as soon as the market overcomes its illiquidity.
Industry players have proposed a number of solutions in an effort to address this illiquidity surrounding locked, or staked, coins. On Sunday, Alluvial announced a liquid joint venture and multi-chain protocol with Coinbase and Kraken as integrators and Staked, Coinbase Cloud, and Figment as validators. The solution aims to provide institutional participants with a viable liquid staking solution.
“Proof-of-stake blockchains account for more than half of the entire cryptocurrency market capitalization, and yet there has been no viable option for institutional token holders to engage in liquid staking,” Alluvial CEO Matt Leisinger said in a statement.
Prior to The Merge, Swiss digital asset banking platform SEBA Bank launched an Ethereum staking service for institutions wishing to earn returns from staking on the Ethereum network. According to the company, this measure responds to the growing institutional demand for decentralized finance (DeFi) services.
“Investors are not only diving headfirst into staking, they are taking advantage of liquid staking services and DeFi composability to amplify the APY and utility of the assets they are already using,” the authors of a report stated. by Bitwise.
The opportunity to gamble could also bring more centralization problems to the community. Hours after completing the update, Santiment’s analysis indicated that 46.15% of Ethereum’s PoS nodes are controlled by just two addresses belonging to Lido and Coinbase, which respectively hold 30.8% and 14.7% of the Ethereum market share. the $13.2 billion of ETH locked as of August 31.
As more staking providers enter the market, not only will institutional holders benefit, but risks can also be spread and network resilience improved, according to Bitwise analysis.
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