Binance’s latest report illuminates the present condition of Ethereum staking while examining the potential consequences of the forthcoming Shanghai upgrade.
Since the Beacon Chain’s inception in late 2020, people have staked approximately 16.5 million ETH worth over US$25 billion as of Feb 23, according to the article.
Around 520,000 validators support the staking procedure. Lido, a liquid staking provider with approximately 5 billion ETH staked and a 29.2% market share, is the industry leader.
The research claims that a sizeable part of ETH holders (about 57%) have had access to liquidity for their capital and rewards for some time. Thus, they have no compelling reasons to sell off after the Shanghai upgrade.
The majority of ETH stakers are not financially motivated to sell their stake as they are not currently in a position of loss. Less liquid stakers, due to limited awareness of liquid staking at their initial stake, make up this group.
A notable consequence of The Merge was the impact on daily ETH issuance. As the shift from PoW to PoS took place, the requirement to provide expensive mining rewards to incentivize miners to maintain network security became obsolete.
EIP-1559 added a fee-burn mechanism to Ethereum’s monetary policy, causing ETH’s supply growth to drop from over 3.5% to -0.03%. The decrease in ETH’s supply growth was a result of the implementation of EIP-1559’s fee-burn mechanism.
In reality, since Jan of this year, ETH has been in a deflationary phase. The ‘ETH = ultra-sound money’ meme emerged from its deflationary nature and asset features, becoming popular.
Importance Of Monitoring Ethereum DeFi Role
The overall economic landscape exhibits instability and presents ongoing challenges to GDP growth and persistent inflation, posing significant risk factors. Since Nov 2020, Ethereum’s DeFi market dominance has declined significantly, from approximately 96% to around 60%. In contrast, the Binance Smart Chain has experienced a substantial increase in market share, rising from 0.1% to 10.2%, while Tron has also seen growth, rising from 2.1% to 10.4% over the same period.
Keeping a close eye on Ethereum’s role in the DeFi industry is essential. Nevertheless, the Shanghai upgrade is a crucial milestone in Ethereum’s shift to Proof of Stake (PoS). This upgrade incorporates EIP-4895, enabling validators to withdraw their staked ETH and accumulated rewards.
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The successful launch of the Zhejiang Testnet marked the first public Ethereum testnet launch of the Shanghai Upgrade. We expect the Ethereum website to release an official announcement about the Sepolia Testnet upgrade around Feb 20. Sepolia Testnet is next in line for the promotion. The Goerli Testnet will be the final testing phase before the Mainnet launch in early April.
This article conveys general information and the opinions expressed should not be considered personal advice for any individual or specific security or investment product.
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