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ETH on-chain data rebounds, Staking regulation benefits decentralized staking.

23-02-20 19:40

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Original Title: "ETH On-Chain Data Rebounds, Staking Regulation Boosts Decentralized Staking"

Original Author: Alan, Cryptocurrency Researcher

ETH on-chain data continues to recover

Since the Ethereum merge, the total amount of ETH has not increased, but has decreased by more than 23,700 through burning, and the current annual inflation rate is -0.053%.

In addition to the usual DEX, ETH transfers, stablecoins, and wallets, NFT applications have also become active under the leadership of Blu.io in the past 30 days. Since November 2020, Ethereum's DeFi market share has dropped from about 96% to about 60%. In terms of NTF, Polygon and Solana have become two potential competitors of Ethereum in the long run. Polygon is working hard to attract Web2 giants such as Disney and Meta to the NFT field, while Solana is slowly recovering after the FTX incident and welcoming new users and artists to try NFT. Of course, the Ethereum blockchain is still the best choice for the vast majority of advanced NFT collections.

From the perspective of gas fees, the entire second half of last year was in a downturn, while recently gas fees have seen a slight increase, indicating that on-chain activity is beginning to pick up.

According to data from Santiment, a cryptocurrency analysis company, the amount of ETH stored on trading platforms continues to decline. Since the Ethereum merge in September 2022, the amount of ETH on all trading platforms has decreased by 37%. The continuous decline in supply on trading platforms is generally considered a bullish sign.

Recently, Lookonchain, a blockchain data analysis website, pointed out that institutions have been buying BTC and ETH in the past week.

Since February 10th, multiple funds and institutions have invested nearly $1.6 billion in the cryptocurrency market, which may be one of the important reasons for the recent market upturn.

How will pledgers respond to Shanghai's upgrade?

Comparing the price at the time of pledging, currently only 21.1% of the pledged ETH is below $1600, while 78.9% of the ETH pledged has a price higher than $1600. As shown in the above chart, the majority of the participating ETH in the pledge are concentrated in the $2500-$3500 range.

From the perspective of principal and interest, that is, the pledged ETH principal + the rewards obtained from the pledge, there are still 59% of pledgers in the "underwater" state. From the perspective of pledgers, those who participate in the beacon chain pledge are generally optimistic about the Ethereum network in the long term. They did not make substantial profits from participating in the pledge during the bull market cycle, so it is unlikely that they will choose to withdraw their pledged ETH after the Shanghai upgrade.

Binance's latest Shanghai upgrade research report also pointed out that most ETH stakers are in a state of loss, with almost no economic incentive to sell ETH at current prices. The report also noted that the price of approximately 2 million ETH staked was in the range of $400-$700, representing the earliest stakers in December 2020, most of whom had little liquidity due to the lack of knowledge about liquidity staking at that time.

Shanghai's upgrade will eliminate liquidity risks and uncertainties associated with lock-up periods, which directly affects impulsive short-term investors. Additionally, the upgrade will transform ETH from "long-term lock-up" to "current income," which may attract a large number of new participants and potentially create buying pressure for ETH, especially given its long-term appeal to institutional investors.

强力监管 Vs 去中心化

Strong Regulation Vs Decentralization

On February 9th, the US Securities and Exchange Commission (SEC) charged the cryptocurrency trading platform Kraken with improper pledging services, violating securities laws, and ordered it to stop all pledging services for US customers. Kraken was forced to agree to pay a $30 million fine and comply with the SEC's requirements. Although this regulation has not yet affected other centralized trading platforms such as Coinbase, these platforms may have to start re-evaluating the compliance of their pledging services.

After the centralization institutions such as FTX, Celsius, Voyager, and BlockFi collapsed last year, it is inevitable that centralized cryptocurrency platforms will face stricter regulation. DeFi protocols, with their decentralized and borderless characteristics, provide anonymous services to users through smart contracts and other automated designs, making them potential beneficiaries. Therefore, the crypto community believes that this event will have a long-term impact on the distribution of ETH staking data, which is favorable for decentralized staking service providers such as ETH, and is also of significant importance for the decentralization of the Ethereum consensus layer.

Centralized Staking and Decentralized Services: Pros and Cons

Usually, the staking services of centralized trading platforms have the advantages of low threshold and convenient operation, but the disadvantage is that the trading platform intercepts 30-40% of the staking profits. According to Coinbase, its staking service revenue in the third quarter of last year was $62 million, accounting for 10% of its total revenue for the same period. In addition, users who entrust funds to the trading platform also bear the potential "third-party" risks of the trading platform.

Currently, Coinbase is the centralized exchange platform with the highest amount of ETH staked, currently staking 2.07 million ETH, accounting for 12.4% of the total staked amount.

As shown in the figure, ETH staking can be roughly divided into four categories: liquidity staking (31.%), centralized exchange staking (27.9%), staking pools (16.3%), and unidentifiable individual or entity staking (24.3%).

Currently, the staked amount of ETH on centralized platforms is considerable, reaching 4.68 million coins, accounting for 27.9% of the total staked amount. If the SEC continues to regulate staking on centralized platforms, it can be expected that more ETH will leave centralized trading platforms and move towards decentralized liquidity staking or staking pool services.

Although decentralized platforms are not yet perfect, it is still a future trend for users to control their funds instead of entrusting them to centralized trading platforms. This will strengthen the long-term prospects of Ethereum and also align with the anti-fragility spirit of blockchain itself.

质押服务格局

translates to

Pledge Service Landscape

From the perspective of the ranking of the amount of collateral, Lido is leading with 4.91 million tokens, accounting for 29.32% of the market share. Apart from Lido, other liquidity solutions (LSD), including RocketPool, Frax Finance, and Ankr, are also available.

From the perspective of the amount of staking in the past week, month, and half year, Lido has a strong head effect, and the staking amount of RocketPool and Frax Finance also maintains a good growth momentum.

Currently, there are several liquidity staking service projects with ETH staking amounts exceeding 50,000 tokens, including Lido (4.91 million), RocketPool (399,000), Frax Finance (90,000), Stakewise (73,000), and Ankr (56,000).

Comparing the market capitalization rankings of governance tokens based on their liquidity collateralization reveals that the market capitalization and collateralization volume of these projects are generally proportional.

Among the aforementioned projects, the token market cap/TVL ratio is 0.24 for Stake Wise, 0.27 for Lido, 1.38 for Rocket Pool, 2.66 for Ankr, and 4.67 for Frax. The smaller the ratio, the greater the TVL behind each token.

The growth rate of Frax's Ethereum liquidity staking has been very fast, increasing from 0 to about 90,000 tokens since its launch on October 21, 2022, mainly due to its higher yield. Currently, the annualized yield is 7.85% (slightly higher than the average yield of 4-5% of other protocols), which continues to attract users to invest in ETH. In addition, Frax's staking volume is much less than Rocket Pool's, but its market value is comparable, which may be due to Frax's support for stablecoins and other Defi product matrices, reflecting a portion of its market value.

Stake Wise has the lowest market value/TVL (0.24) and a high annualized yield of 5.48%, which is higher than the market average. However, its pledge growth has been relatively slow in the past 30 days, and its subsequent performance needs further observation. In contrast, although Lido has the highest pledge amount, it still maintains a low market value/TVL ratio of 0.27 and a yield of 5.3%, compared to other competitors in the market. Its TVL is steadily increasing, so it still has enough strength to maintain its position as the leader in pledge in the short term.

In addition, there are some unmanaged Staking solutions, including Ebunker, P2P, Stakefish, and other Pools. As they are unmanaged solutions, they cannot provide a savings account similar to stETH. However, they allow users to control their withdrawal private keys themselves, rather than transferring them to a third party, which increases the security of Staking to the highest level.

With the approaching of Shanghai's upgrade, the competition in the Ethereum staking field is slowly unfolding.