A blockchain startup has created an investment trust that will allow individuals to bet on the next generation of Ethereum, with interest.
The blockchain behind the world’s second-largest cryptocurrency by market value is scheduled at some point over the next year or so for an upgrade, to Ethereum 2.0. One benefit for investors is they can receive “staking rewards,” similar to interest payments, from the upgrade. In this case, that works out to about 8% annually.
The new Staked Eth Trust lets accredited investors tap into those rewards with the ease of buying a stock. It joins a cottage industry of new trusts and exchange-traded products aiming to give investors in traditional markets a way of betting on cryptocurrencies, without the hassle of having to buy the digital assets directly.
“An investor in the trust gets the benefit of exposure to ether, plus the rewards from staking that ether without having to purchase it, custody it and stake it independently. It's all handled by the trust,” CEO Tim Ogilvie told CoinDesk in an interview.
The product will be available for accredited investors for the time being, as are other crypto-focused funds including the Grayscale Trust suite or Bitwise’s index funds. Grayscale, the world’s largest cryptocurrency asset manager, is a unit of Digital Currency Group, the owner of CoinDesk.
However, the Staked Eth Trust sits more squarely in line with other Eth 2.0 financial products such as Lido Finance’s liquid staking or Coinbase’s Beacon Chain ether (BETH). Those products remain walled off from institutional players given the high degree of crypto-specific knowledge needed to implement them.
“As you see a lot of institutional interest in bitcoin, I think a very natural next step is how does Ethereum work? There are a bunch of investors who believe that the risk/return on Ethereum is significantly higher than that on Bitcoin,” Ogilvie said. “If Eth 2.0 successfully pulls off what they say they are going to do, you have this combination of a supply that is shrinking all the time plus the fact you can stake it and earn yield on top of that.”