According to CoinDesk, staking has gained significant traction in recent years, driven by the availability of staking-as-a-service, pooled staking, and the rise of liquid re-staking. As of July 2024, Ethereum's security budget stands at an impressive $110 billion worth of ETH, accounting for approximately 28% of the total ETH supply. The adoption of staking features within exchanges and financial applications has enabled users to allocate their ETH to secure the Ethereum network. Staking is often seen as a low-risk investment, making it attractive to ETH holders. Notably, Ethereum co-founder Vitalik Buterin has a portion of his ETH staked, while keeping some unstaked.
As staking continues to grow, particularly through liquid staking derivatives, there is a need to better quantify staking returns across different platforms and how they evolve over time. The Composite Ether Staking Rate (CESR) oracle feed, a standardized on-chain Ethereum Staking Rate, serves as a useful benchmark for analyzing staking trends. Understanding these trends is crucial for assessing their implications and the potential for generating additional revenues for ETH holders.
Despite the importance of staking for Ethereum's security, there are compelling reasons to consider reducing the ETH issuance rate. One argument is the diminishing returns on security; beyond a certain point, adding more validators contributes less to network security, while the costs, primarily through ETH issuance, continue to rise. Additionally, increased staking leads to higher operational costs for validators, such as hardware upkeep, which can make the network more expensive to maintain. There are also centralization risks, as large entities or staking pools controlling significant portions of staked ETH could compromise Ethereum's decentralization. Lastly, excessive issuance of new ETH to reward validators can lead to inflation, diluting the value of existing ETH holdings.
The future of staking, especially through liquid re-staking, is rapidly evolving. As Ethereum continues to innovate, it will be important to better quantify trends in this area. For a detailed analysis of recent liquid staking and re-staking yields, please refer to our latest research report.
