Demand for liquid Ethereum staking options continues to grow post-Merge

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Blockchain data ana­lyt­ics car­ried out by Nansen high­lights the ever-grow­ing amount of Ether (ETH) being staked across var­i­ous stak­ing solu­tions in the months fol­low­ing Ethereum’s shift to proof-of-stake (PoS) consensus.

The high­ly antic­i­pat­ed Merge has been a boon for decen­tral­ized finance (DeFi) in gen­er­al, and stak­ing solu­tions have been in high demand since Ethereum’s shift to PoS. This is accord­ing to blockchain data from a vari­ety of stak­ing solu­tions across the Ethereum ecosystem.

Nansen’s report high­lights the impact of the Merge in intro­duc­ing staked ETH as an out-and-out cryp­tocur­ren­cy-native yield-bear­ing instru­ment that has quick­ly out­stripped oth­er col­lat­er­al­ized yield-bear­ing services. 

The likes of Uniswap and oth­er auto­mat­ed-mar­ket mak­ers and liq­uid­i­ty providers remain pop­u­lar but pale in com­par­i­son to the total val­ue locked in staked ETH solu­tions. Over 15.4 mil­lion ETH is locked in Ethereum’s stak­ing con­tract, which val­ues the total staked ETH in the top six cryp­tocur­ren­cies by mar­ket cap­i­tal­iza­tion alone:

“Staked ETH is thus the first yield-bear­ing instru­ment to reach sig­nif­i­cant scale in DeFi, and has the poten­tial to both sig­nif­i­cant­ly grow and rad­i­cal­ly trans­form the ecosys­tem in the com­ing years.”

Nansen pro­vides some inter­est­ing insights from liq­uid-staked deriv­a­tives data. When Ethereum shift­ed to PoS, min­ers were replaced by val­ida­tors who had to deposit or stake 32 ETH in order to pro­pose new blocks and earn pro­to­col rewards. Users that are unable or unwill­ing to stake 32 ETH can par­tic­i­pate in pooled stak­ing, also known as liq­uid stak­ing. This also allows users to with­draw staked ETH at any time.

Nansen’s met­rics reveal that liq­uid stak­ing hold­ings are weight­ed toward long-term hold­ers, while recent­ly launched pro­to­cols are attract­ing new deposits faster than estab­lished ser­vices. 5.7 mil­lion of the total 14.5 mil­lion ETH is staked in stak­ing pools like Lido and Rock­et Pool, account­ing for over 40% of the total staked ETH in the ecosystem.

Lido’s staked ETH (stETH) pool dom­i­nates the space with a 79% share of the total mar­ket sup­ply of staked ETH. 52% of the stETH tokens are found in Aave, Curve and Lido’s 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.

Relat­ed: 64% of staked ETH con­trolled by 5 enti­ties — Nansen

Mean­while, stak­ing pools belong­ing to Rock­et Pool (rETH) and Coin­base (cbETH) have seen the most growth over the past three months, at 52.5% and 43.3%, respec­tive­ly. Coinbase’s cbETH has sur­passed all oth­er assets besides stETH in sup­ply despite hav­ing only launched in August 2022.

The growth of Coinbase’s ETH stak­ing option also sug­gests that every­day users still trust cen­tral­ized enti­ties and are con­tent earn­ing yield from staked ETH as opposed to more com­plex, on-chain, yield-bear­ing strategies.

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