Feb 22, 2024

Nik Polk, senior research analyst at Nansen, joins "First Mover" to discuss the rising interest in ether (ETH) staking.

Video transcript

Steak Eve is at all time highs and is continuing to grow. So what does this mean for the Ethereum ecosystem joining us now to discuss is Nanson, senior research analyst, Nick Polk. Let's talk about the Ethereum ecosystem and staked E and let's start at the very beginning for our audience just briefly explain to me what staked E is. How does it work? How are people uh sting their e and then receiving incentives for that. So basically, um with the Shanghai update, um now you can also unstick Eve before you could only stake it. So basically Stake Eve is used to secure the network since it shifted from um yeah, proof of work to proof of stake, you need something kind of to, to some sort of collateral to make sure that the um network is secure and this is the process of es staking. And there are several ways you can do that. Um You can either spin up your own validator and stake um 32 eve minimum. But since at these prices, it's uh not for everyone, there are different methods where you can only take one eve or or half an E um which basically then goes through a third party. Um Either what is most common is like a, a centralized exchange where you can basically um have, for example, Binance or coin based, take um your E for you or decentralized options where the biggest one by far is Lido where you can give them your um and they take it for you and in return you get um an LST which is a liquid staking token which represents the E you gave them and which is the token in itself where you can do various things with and you can earn rewards for staking your E and that's similar to interest you can um you can earn in the traditional finance world. Talk to me about why each staking has become so popular now because if, if my understanding is correct, the incentives aren't as high as they once were. And basically, basically this comes from the network usage. So you get paid a bit on um E inflation. But also if you pay to use the network, um this money then in turn goes to the E takers. Um and this percent is indeed not high. But where it becomes interesting is um that once you state your E um and you get, for example, the, the basically receipt token or the LST ST E from Lido. And what you can do is you can take that again and earn additional yields where these 3 to 4% go as high as 20 to 30%. And this is uh then again, very attractive for many investors. I know staking. Um it came into the purview of regulators in the United States last year. They were talking about staking. Uh has there been any movement on the regulatory front, as you already said? Um It's a bit of a, of a scrutiny and especially for the centralized players who are regulated by the, um it becomes a bit difficult. For example, trading had to basically discontinue their eating business and had to withdraw all the EBA staked and redistribute it to the people that they put it in. Um I think kind base is, is still offering it and they've been actively resisting it. Um But to my knowledge, it's still a bit up in the air, but many people basically then resorted to the decentralized options instead, especially since um they are the options to earn additional yields on your staking. Um are a bit better than for the centralized counterparts. Well, we're talking about all time highs. So it seems like even if there was some regulatory scrutiny, people are still participating in the product. Now we have a foundation for staking and now we want to introduce retaking into the conversation. Um I've spoken to the folks at Eigen Layer here on this show, but Eigen Leer has become a really popular retaking protocol talk to us about what retaking is and uh how that now becomes part of the conversation. So basically what resting is that you can use your staked e that you already staked to get basically the receipt talking for it and you can use this to secure another network on top. So basically with your theorem, you not only secure the theorem network but another network as well. For angle, for example, this could be the end a the Eigen data availability layer that will then be secured by the already state E basically. So you're double dipping with the Ethereum and the traditional yield. And since the project II, I really, really like the project, I really like the idea. Um And they do not have a token yet. Um but you can basically already earn points and at some point in the future, you will be able to exchange these points for the token or they add up with the token depending on how many points you have. Um So people are already heavily speculating on this and um kind of assigning the token of value. And uh yeah, trying to earn as many points as possible. Um which is why they are so eager to, to participate in the staking in order to restate basically. And I think Angler as of now has attracted around $8 billion worth of state already uh quite impressive. Um Yeah, and this, I think almost like not quite, but I think almost 10% of all steak eat. Um is um in Einer. Why do you think it staking has become so popular? Nick? I think a lot of people like myself or like at least, I hope a lot of people like myself are just in general. Um Yeah, just, just really like it there and they have e lying around, they believe in the project, they believe in the price going up. And uh yeah, if you have it, you might as well put it to work. And uh this is just the the best option to do it. And I know when it comes to retaking, we talk a lot about Eigen later, but there's also a pal that's jumped into the narrative. Tell us a little bit about that. So basically pendle is the defect protocol that enables you to not necessarily speculate on the price of an asset but on the yield of an asset. So you can basically um speculate that uh the yield or like the APR you will earn with an asset will go up or down or if you're on the other side of the trade, you can say, ah I want to kind of fix my yield for the next five months. I think it might go down. So let me just fix it um at a certain rate. And these two people get together, some people that think it's gonna be higher than now, some people that think it's gonna be lower and and want to basically stay at the level close to now. And this um in combination with iron layer or other retaking protocols enables people to predictably earn yield on ether. That's pretty interesting. Do you think we're going to see more projects like Pendle pop up as staking and retaking become more popular? I do think so I don't only think that other projects like panel will pop up, but I also think projects built on top of panel um will pop up. Um As that is the case in in defile in general, like ein layer is kind of built on top of um the staking defile. Then panel uses E layer again and then something I'm sure will will pop up on top of panel. There are already some projects that do that, but I expect to see more of that. You know, there's all this talk about the potential for a spot E ETF approval sometime this year. Some are thinking maybe may, how do you think staking retaking might come into the conversation when it comes to the spot E ETF? Do you think that this feature of the Ethereum ecosystem might make the spot E ETF more desirable to folks maybe make it even more successful than the spot? Bitcoin ETF, I think in the long run, they will probably incorporate some sort of, of staking for the for the if they they offer um to the option of it makes it more desirable than the BT C ETF Um I don't know, I think the BT C narrative is very powerful as well. And um if you kind of offer an ETF like you also have to think about how to, to sell it to other people. Um And they're like all these technical terms, why BT C is such a great asset to basically have in your portfolio via this ETF um which I think is not quite as strong for a theorem. So I'm I'm not quite sure. I think there are several factors that um might cancel each other out. But um staking is definitely a positive for the two and very quickly before we wrap up, what do you think needs to happen to make staking more mainstream? You know, when you explain staking, it sounds like something that web three natives folks who have operated in the crypto space for a long time can do and maybe it comes a little bit easier to them, they might understand how to do that. Um I know you mentioned there are centralized exchanges that allow you to stake less than 32 E but what really needs to happen for anyone, you know, the mainstream person who's maybe a little crypto curious who's dabbled in Bitcoin and Ether to stake Ether and participate in some of the rewards and benefits that we've been chatting about, I think um when the, when just the general UX for, for D five becomes a bit better, then I think it will retake off since. Um As you already said, the centralized exchanges offer already staking and a lot of people that have on centralized exchanges just take it there. Um But uh they just get these 3 to 4%. But if you somehow manage to have like a very accessible UX to these D five protocols that offer 20 to 30% um then I think it might really take off Nick. Thanks so much for joining the show today. Thanks for having me. That's Nanson, senior research analyst, Nick Polk.

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