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Just shy of $45 billion or 20% of Ethereum in circulation has been staked—a milestone reached on Monday that captures coins at work like never before.
People pledge tokens to the network to keep it secure and receive rewards for doing so. And close to 24 million Ethereum is currently locked up across 744,000 validators that process transactions, according to a dashboard on Dune Analytics created by a user named hildobby.
— hildobby (@hildobby_) July 10, 2023
Ethereum is one of many blockchains that utilizes a proof-of-stake consensus model, which, in the case of Ethereum, involves validators pledging at least 32 Ethereum for the chance to validate transactions and receive associated fees.
But that hasn’t always been the case. In September of last year, after much anticipation, Ethereum transitioned from proof-of-work—an energy-intensive process used by networks like Bitcoin—to proof-of-stake. And for months, staked Ethereum couldn’t be withdrawn until an upgrade this past April enabled it.
For reference, around $29 billion worth of Ethereum, or 14.5% of ETH in circulation, was pledged leading up to the pivotal Shanghai upgrade that enabled staking withdrawals.
Monday’s milestone represents a noteworthy achievement and captures the success of Ethereum’s journey toward a consensus model that’s ultimately friendlier on the environment, prominent venture capitalist and crypto analyst Adam Cochran told Decrypt.
“This is a huge point of progress for the network, aligning economic incentives with security goals works and is critical for a decentralized network,” he said. “We should all be proud of this milestone.”
When it comes to how people stake their Ethereum, Lido Finance, the crypto market’s largest liquid staking protocol, is by far the most popular choice. Allowing users to stake ETH in any amount and receive a staked Ethereum token called “stETH” in exchange, it accounts for nearly 32% of all staked Ethereum, according to Dune.
Cryptocurrency exchanges are also big players. Coinbase, Kraken, Binance, and OKX account for around 19% of all staked Ethereum, according to Dune. In a bear market, where trading volumes are depressed, staking has helped exchanges find an alternative source of revenue.
Yet regulators in the U.S. have their qualms with how staking services are offered to customers, alleging they run afoul of securities laws. Both Kraken and Coinbase have faced regulatory heat for staking products this year—Kraken settled a lawsuit in February and Coinbase’s is ongoing.
Financial institutions are paying attention to staking and exploring how it can bolster the products they offer, in Canada, at least. Two weeks ago, the digital asset manager 3iQ said two of its exchange-traded funds (ETFs) will offer staking to clients in August.