On Chain Staking Ethereum Yield Strategies

On-chain staking is a way to earn Ethereum yield by validating transactions on the Ethereum network. It's a relatively new concept that's gaining popularity.

Stakers can earn up to 4% APY through staking, which is significantly higher than traditional savings accounts. This is because stakers are contributing to the security and decentralization of the Ethereum network.

As of now, there are no fees associated with staking Ethereum, making it an attractive option for those looking to earn passive income.

On-chain staking is a way to participate in the validation process of a blockchain, allowing you to earn rewards in the form of transaction fees.

On-chain staking occurs on the blockchain itself, rather than on a separate platform or exchange.

Ethereum's transition to Proof of Stake (PoS) in 2022 marked a significant shift towards on-chain staking.

By staking your Ethereum, you're essentially depositing your coins into the network to help validate transactions and create new blocks.

This process requires a significant amount of Ether, with the minimum requirement being 32 ETH.

On-chain staking is a more energy-efficient and secure way to validate transactions compared to traditional Proof of Work (PoW) methods.

For your interest: Ether Proof of Stake Date

Ethereum staking has grown remarkably, with over $100 billion (32 million ETH) currently deposited into the beacon chain staking contract securing the blockchain.

The staking yield, which is composed of ETH issuance and a portion of the network's transaction fees, has dropped from near 10% initially to just over 3% at the moment. This is not an attractive yield for most investors, so multiple strategies are built on top of the base staking APY to enhance the return profile.

A popular strategy is leverage staking, which is enabled by liquid staking tokens (LSTs) like Lido's stETH. These tokens create a wrapper around Ethereum validator holdings, allowing these positions to be used across DeFi applications.

Here's a simplified overview of how leverage staking works:

At the time of writing, Aave users can borrow ETH against stETH up to slightly over 10x leverage, yielding a 12% APY. However, this level of leverage is close to the liquidation threshold, making it a high-risk strategy.

Leverage staking is a strategy that enables you to earn staking rewards while still being able to use your Ethereum holdings in DeFi applications. This is made possible by liquid staking tokens (LSTs) like stETH, which create a wrapper around your Ethereum validator holdings.

To execute this strategy, you'll need to deposit stETH as collateral into a lending protocol like Aave, where it will passively earn a staking yield of around 3.5%. This is a key step, as it allows you to earn rewards while still having access to your funds.

The next step is to borrow ETH against your stETH collateral, typically at a lower rate of around 2.5%. This is crucial, as the borrow cost must be below the staking yield for the strategy to be profitable. If it's not, you'll end up losing money.

Here's a simplified overview of the process:

The Pectra update on Ethereum will soon change the staking landscape, allowing validators to merge into larger entities with up to 2,048 staked ETH. This will promote resource efficiency and reduce overhead for individual stakers, while maintaining the network's security.

Expand your knowledge: Will Ethereum Go up

Leverage staking returns are directly proportional to the amount of leverage carried out. The higher the leverage, the higher the potential APY.

At the time of writing, Aave users can borrow ETH against stETH up to slightly over 10x leverage. This level of leverage yields a 12% APY.

To put this into perspective, if you were to borrow ETH against stETH at 10x leverage, you'd be very close to the liquidation threshold. This means that even a small market fluctuation could trigger a liquidation of your position.

Here's a breakdown of the potential APY at different levels of leverage:

The key takeaway is that leverage staking returns increase with the amount of leverage, but so does the risk. It's essential to carefully consider your risk tolerance and market conditions before implementing this strategy.

Boosting Ethereum exposure with IntoTheBlock's automated risk management capabilities can be a game-changer for investors.

Ethereum staking has grown remarkably, with over $100 billion in deposits into the beacon chain staking contract securing the blockchain.

The cost to attempt an attack on Ethereum is prohibitively expensive, making it one of the most secure blockchains.

However, the yield paid out to validators has dropped from near 10% initially to just over 3% at the moment.

This means multiple strategies are built on top of the base staking APY to enhance the return profile.

IntoTheBlock's automated risk management capabilities can help boost exposure to Ethereum's staking yield.

By leveraging this strategy, clients of the ITB Smart Yields platform can optimize their execution and risk management.

This is a popular strategy for those looking to enhance their Ethereum exposure and maximize returns.

Ethereum transitioned from Proof-of-Work to Proof-of-Stake on September 15th, which has far-reaching consequences for the DeFi ecosystem.

The introduction of staked ETH has created a new backbone for DeFi, with a popular, crypto-native yield-bearing instrument.

With 14.5 million ETH deposited into the staking contract, the value of staked ETH alone would be the equivalent of a top-six cryptocurrency by market capitalization.

This significant scale and influence of staked ETH have the potential to both grow and radically transform the DeFi ecosystem in the coming years.

Staking Ethereum with Kiln is a straightforward process that can be completed in under 5 minutes.

To get started, you'll need 32 ETH to run your own validator and start staking.

You can also participate in staking pools to mutualize your ETH and staking rewards with other users, making it easier to reach the 32 ETH threshold.

Kiln Onchain takes care of all the technical details, so you don't need to generate validation keys or send deposit information to the smart contract.

You'll also be able to connect with the Beacon chain seamlessly through Kiln Onchain.

Ethereum, the world's second-largest cryptocurrency, made a significant switch from Proof-of-Work to Proof-of-Stake on September 15th. This has far-reaching consequences, particularly in the world of Decentralized Finance (DeFi).

The Proof-of-Stake system introduces a new backbone for the DeFi ecosystem, a popular crypto-native yield-bearing instrument. This instrument is crucial for building industry verticals and products.

Prior to staked ETH, the broader crypto ecosystem lacked a yield-bearing instrument on which to build. Traditional finance has entire industry verticals and products built around yield-bearing assets.

Staked ETH has reached significant scale in DeFi, with 14.5 million ETH deposited into the staking contract. This value would be equivalent to a top-six cryptocurrency by market capitalization in its own right.

The Ethereum AMM market on Aave currently accounts for just $5 million in Total Value Locked, a small fraction of the platform's TVL.

Here's an interesting read: Firm Value Chain

Liquid Staked Ethereum (LSD) has seen significant adoption in recent months, with 40.5% of the 14.5M ETH staked being staked via LSD platforms such as Lido and Rocket Pool.

This adoption rate has been steadily increasing since The Merge, with a significant jump in the past month exceeding the combined growth of August and September.

Net LSD holdings are weighted towards long-term holders, who have held LSDs for more than 365 days, indicating a strong foundation for the asset.

Lido's stETH is the dominant LSD market leader, with its current supply (79% of the total market) and number of holders far exceeding its competitors.

stETH has seen a sizable 6.2% growth in the past month, and while its percentage-wise growth is lower than major competitors, it has seen more ETH being deposited into its protocol than all of its competitors combined.

Rocket Pool's rETH and Coinbase's cbETH are rapidly gaining ground, with rETH boasting a 52.5% increase and cbETH a 43.3% increase over the past 3 months.

The token holding distribution of LSDs indicates that the greatest portion of the supply for each of the derivatives belongs to long-term holders, who are taking the lead in adoption.

Take a look at this: Streamlining E-commerce: the Impact of Parcel Lockers on Supply Chains