The evolution of ETH Staking market demand, yield and products after the Shanghai upgrade

特邀专栏作者

2023-05-24 04:03

This article is about 1961 words, reading the full article takes about 3 minutes

It is still in the bonus period of ETH Staking. Therefore, participate in Staking as soon as possible and start queuing as soon as possible. The current high APR of Nuggets is the best choice for ETH holders.

first level title

ETH staking demand rises after withdrawal wave

ETH staking has been available on the Ethereum Beacon Chain since December 2020, but staking withdrawals were not enabled until last month’s Shanghai upgrade. After the Shanghai upgrade, the market demand for ETH staking increased significantly as Ethereum validators were able to withdraw the pledged ETH.

Currently, ETH holders can participate in staking by setting up network validators or staking service providers such as LSD, earning 4-6% of ETH coin-based income per year. In the eyes of most investors, the opening of ETH staking withdrawals improves the flexibility of funds, and there is no need to worry about funds being locked for a long period of time, and the risk of staking is greatly reduced.

Judging from the trend chart of ETH pledged deposits and withdrawals, after the Shanghai upgrade, the tide of withdrawals is gradually subsiding, and recently pledged deposits have greatly exceeded the number of withdrawals.

According to data from Wenmerge.com on May 20th, there are 62,932 "quasi-verifiers" waiting in the pledge waiting queue. If you want to queue up to pledge ETH on the Ethereum network, you need to wait for 34 days and 2 hours; There are only 6 validators, and there is almost no need to wait in line.

Since the total supply of ETH is about 120 million, this means that the current pledge participation rate of Ethereum is 15.47%, which is an increase from 15.1% before the Shanghai upgrade.

first level title

ETH's potential dual "deflation" trend

Compared with other PoS blockchains such as Cardano, Solana, Avalanche, Cosmos, etc. that can withdraw pledges flexibly (the pledge participation rate is in the range of 60-70%), the pledge rate of ETH still has a lot of room for improvement. Allen, the founder of Ebunker, predicted that the future pledge rate of Ethereum will be around 40%. Of course, given that only 50,000+ ETH are allowed to be withdrawn from the staking contract per day, ETH staking withdrawals are not strictly speaking fully flexible (actually it depends and sometimes requires queuing), so the above may not be possible A pledge participation rate as high as that of a PoS blockchain.

Judging from the current situation, the staking participation rate of ETH will gradually increase over time, and the number of unstaked ETH will gradually decrease, which will provide the first support for the price of ETH.

In early May, the ETH burn rate spiked as a result of the recent rise in transaction fees due to meme-related network congestion, with ETH short-term annualized inflation hitting -8.3% at one point.

first level title

LSD gets more liquidity

The value of liquid capital unlocked by the upgrade in Shanghai exceeded US$35 billion, which had a major impact on the liquid collateralized derivatives (LSD) market, and market liquidity increased significantly. Before unlocking, the main risk of holding LSD (such as stETH or rETH) was the fluctuation of the LSD to ETH exchange rate, but this is no longer the case.

Take Lido Staked ETH as an example, as the Lido protocol’s stETH gains liquidity, it becomes the most liquid LSD. Thanks to the snowball effect, Lido Staked ETH quickly gained most of the staked ETH market share. Over longer time horizons, a similar situation is likely to play out more broadly across asset classes.

first level title

According to Delphi Digital's forecast, ETH's collateralization rate will double in the next 12 months. Judging from the recent 5% staking annualized rate of return, it is very cost-effective for ETH stakers. However, as more and more users participate in staking to get rewards, the staking yield will be compressed. Future ETH staking yields are expected to gradually drop to 3%, and stakers will seek alternatives to increase their yields.

secondary title

Case 1: OETH of Origin Protocol

OETH was created in response to the latest developments in Ethereum and LSD. OETH hopes to provide an alternative to LSD, earning income from staking rewards, transaction fees, and token rewards. Specifically, OETH’s income sources include ETH pledge interest + DeFi strategy profits and other token rewards (Compound, Aave, Curve, Convex, etc.).

First of all, by holding LSD, OETH can obtain the basic rate of return from validator rewards; secondly, by providing DeFi liquidity, you can also obtain more income; finally, because ETH in DeFi earns transaction fees and token rewards, OETH holders will also receive additional benefits.

The rebase mechanism enables holders to earn rewards without paying gas fees or staking their tokens. The end result is significantly higher APY on ETH without any of the hassle associated with staking. The nature of the Origin protocol makes it one of the easiest ways to earn ETH yields over traditional LSD protocols.

Regarding the security of the Origin protocol, OETH has passed the OpenZeppelin audit, and OpenZeppelin is also responsible for the security audits of Coinbase, Aave, and The Ethereum Foundation.