Here is a quick round-up of these staking pool operators and a look at their numbers, that could well catapult after The Merge.
After years of development and testing, the Ethereum mainnet is finally scheduled to merge with the proof-of-stake Beacon Chain on September 15. In the process, mining will be replaced by staking as the method to verify and add blocks to the blockchain.
While staking is up to 99 percent more energy efficient than mining, the entry barrier on Ethereum remains quite significant. This is because users need to lock up a minimum of 32 ETH to participate in the staking process, that’s more than $53,000 at current rates.
Suffice it to say that not everyone possess such a large amount of tokens, and even fewer would want to lock it up with the network indefinitely. This is where staking pools come in. They allow network participants to poll their ETH together, so as to meet the minimum requirement, and begin staking a collective. Staking rewards are then distributed amongst the participants in proportion to their contribution to the staking pool.
Several platforms offer staking services for Ethereum’s PoS Beacon Chain. However, what’s surprising is that just 5 of these platforms account for more than 60 percent of all the staked ETH on Ethereum’s Beacon Chain. Here is a quick round-up of these staking pool operators and a look at their numbers, that could well catapult after The Merge.
Lido Finance is the largest ETH staking pool operator, controlling more than 31 percent of all the ETH locked into the Beacon Chain, according to data from Messari. As per its website, the platform has nearly 4.3 million ETH, which equates to roughly $7.1 billion worth of staked assets.
One of the reasons why Lido is so popular is its liquid staking option – it provides an equal amount of sETH for every ETH they lock up. This sETH can be used sold, traded or used as collateral while your ETH is staked with the network. Lido offers returns of 3.9 percent APR. on staked ETH.
Coming in a distant second is Coinbase, which accounts for 14.7 percent of the total ETH staked on the Beacon Chain. That adds up to nearly 2 million ETH which is stored in more than 1,000 different wallets. The crypto exchange could also see an influx of new stakers after the launch of its liquid staking option in August.
Now, users receive one cbETH for every ETH you pledge to the network. Similar to Lido’s sETH, these cbETH can also be used for varying purposes across lending platforms, crypto exchanges, and so on.
Kraken is the only platform on the list that does not offer a liquid staking option. This means that investor coins are locked in the staking smart contract. The only way they can get their ETH back is to wait for the Shanghai update, which is 6 to 12 months away, and until which time, withdrawals will stay disabled.
As per the Messari data, Kraken holds 8.5 percent of the staked ETH, which amounts to around 1.1 million ETH. Users who stake their coins through Kraken can expect yearly rewards of 4 to 7 percent.
Coming in fourth is the global crypto exchange Binance. The platform has a 6.6 percent share of the total ETH staked on the Beacon Chain. This adds up to nearly 900,000 ETH which is held in 8,929 wallets, as per data from BscScan.
Like Lido and Coinbase, Binance also offers liquid staking through the BETH token. Users who deposit their ETH into the staking pool will receive an equal amount of BETH, which is pegged 1:1 with Ethereum. Further, it can also be used across most Binance ecosystems.
Finishing up our list is Staked Us, a crypto exchange and wallet provider based out of New York. According to the Messari data, the platform held about 3 percent of the staked ETH, amounting to around 400,000 ETC. Staked is also offering lucrative a yield rate of up to 17.7 percent. However, the rewards begin to reduce as the amount of staked ETH increases.
This concentration of staking power in the hands of a few might seem alarming, especially when blockchain technology aims to do away with centralisation. However, you must remember that all these staking pools represent thousands of individual investors, with the platform just providing them a base to connect and stake collectively.