2023-6-28 17:30 |
Since the Shapella upgrade for Ethereum went live in April, the amount of staked ETH has jumped 41%. Out of the 120.2 million ETH in circulation, 21% is now locked up in staking contracts.
One thing which draws much press, however, is the dominance of the top staking providers. As it requires 32 ETH ($60,000) to become a validator, this is not feasible for most users of the network. Hence, we have staking pools, which allow users to pool their assets and earn yield, despite not breaching this 32 ETH threshold.
Looking at the top four providers (Lido, Coinbase, Kraken and Binance), we see that they are responsible for close to 50% of all staked ETH.
To some, that flies in the face of ETH’s decentralised mantra. To get some more insight into ETH staking, as well the dominance of the top providers, Invezz spoke with Chen Zhuling, CEO of RockX, which has recently launched an ETH native staking solution.
RockX InterviewInvezz (IZ): There are many native ETH staking providers. Do you think it will be difficult to attract liquidity when some of the bigger providers are so well established?
Chen Zhuling (CZ): It’s undeniable that bigger staking providers command the lion’s share of ETH. However, the launch of RockX’s Liquid Staking product, Bedrock, as well as our bespoke White Label solution, solidifies us as a pivotal force for institutions braving the waves of Ethereum adoption. We emphasise not just scale, but agility and market understanding, addressing the unique challenges institutions faced, from liquidity to technological mastery. Furthermore, we see the Asian market, in particular, as an underserved sector. Our proximity and focus on this region offers a unique growth opportunity for RockX to cater to its specific needs.
IZ: The top four ETH staking providers (Lido, Coinbase, Kraken, Binance) account for around 50% of ETH staked. Lido alone accounts for 30%. Do you think this concentration is a concern?
CZ: Since Ethereum’s seismic shift to Proof-of-Stake, the number of validators have surged, signalling a radical decentralisation unseen in the Proof-of-Work era.
Despite a sizable concentration among the top four staking providers, they’ve played a pivotal role in setting the stage for the network’s present security and operating norms.
The landscape is evolving; it’s only a matter of time before we see staking allocations peppered across a wider, more diverse set of stakeholders, driving Ethereum towards true decentralisation.
Will regulation affect Ethereum staking?IZ: The SEC recently sued Coinbase, with the suit including allegations that its staking product was in violation of securities laws in the US. With Coinbase as the second biggest staking provider, do you think this could have any effect on the market?
CZ: The SEC’s run-ins with Kraken and Coinbase underscore the need for a robust and diversified validator network.
Given these recent events, it is also more essential than ever to emphasise the distinction between custodial and non-custodial staking. Non-custodial staking, a realm where users hold the reins of their tokens, not only promises transparency but also immunity from regulatory storms.
Moreover, it’s crucial to restate the genuine meaning of staking in a way that regulators understand, avoiding confusion with the conventional concept of staking often linked with questionable yield farming practices. As we advance, the industry could benefit from formalising the use of the term “validator staking” — which specifically refers to the rewards that stakers receive for facilitating transactions and securing blockchain networks.
IZ: Being based in Asia, how do you view the US regulatory clampdown on crypto (and staking specifically, with regard to securities law violations)? Are you concerned about the effects on crypto as an industry, or do you believe US companies can move to other jurisdictions, such as Asia?
CZ: While the US regulatory blitz has rattled the crypto sector, the ultimate outcome is still in the crucible, contingent on the ongoing discourse in Congress. Concurrently, Asia is emerging as a hotbed of regulatory clarity and innovation. With Hong Kong greenlighting retail crypto trading and Singapore’s holistic approach to crypto technology, the region is fostering a burgeoning ecosystem ripe for migration and growth.
How has the crypto winter affected Ethereum staking?IZ: Prices, volumes and public interest in crypto is still far below the highs of 2021. How much of a dropoff have you noticed with regard to interest in institutional staking on Ethereum?
Far from seeing a drop-off, RockX is witnessing an institutional upswing in crypto interest, driving our strategic focus towards these key players. As institutions unravel the potential of Ethereum staking — whether it’s the allure of passive fund yields or hedging market risk with structured products — it’s clear that they’re playing the long game and seizing opportunities as early as now.
IZ: Difficult question, but where do you ultimately see the yield on ETH staking going?
CZ: The advent of the Shapella Upgrade’s instantaneous stake/unstake feature spurred a notable increase in ETH staked.
We anticipate this momentum to persist in the near future, bringing us closer to a true market equilibrium that may see staking yields steadying between 4-6%.
Though seemingly modest, this equilibrium marks a significant leap in the industry. It opens up the gateway for both crypto and non-crypto stakeholders to tap into sustainable crypto yields without the perils of lending or trading — a marked departure from the turbulence of 2022.
The post Interview: Ethereum staking – RockX appeared first on Invezz.
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