Investor Demand for Ether Staking Yields Has Slowed: Coinbase

Staking yields have dropped to 3.5% from above 5% in the last few months, the report said.

AccessTimeIconOct 16, 2023 at 8:48 a.m. UTC
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global hub for everything crypto, blockchain and Web3.Register Now

The Ethereum blockchain validator queue has emptied for the first time since the Shanghai upgrade in May, a signal investor demand for ether (ETH) staking is leveling off, Coinbase (COIN) said in a research report Friday.

Validators verify transactions by locking up ether in exchange for rewards. The blockchain’s Shanghai upgrade allowed for the withdrawal of staked ether for the first time.

With the validator entry at peak capacity in recent months, staking yields have dropped to 3.5% from more than 5%, the report said.

“The yield on staked ether provides a floor for the crypto ecosystem,” wrote analysts David Duong and David Han, “providing a benchmark for alternative crypto investments.”

If underlying activity and transaction fees remain consistent on the network, Coinbase says it expects the staking yield to remain flat now that validator growth has slowed.

Activity on the Ethereum mainnet held steady during the third quarter, while its total rollup transactions increased, the note said.

“With no major Ethereum protocol upgrades until Dencun, which is likely to occur in the first half of 2024, we see no major technical drivers that would meaningfully impact onchain activity – barring major new protocols or egregious hacks,” the report added.

The Dencun upgrade includes five Ethereum Improvement Proposals (EIPs) that are designed to add more storage for data and reduce fees on the blockchain.

Edited by Sheldon Reback.

Disclosure

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk offers all employees above a certain salary threshold, including journalists, stock options in the Bullish group as part of their compensation.

Author placeholder image

Will Canny is CoinDesk's finance reporter.


Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.