VanEck's European market Solana ETN collateralization, will it test the waters for future Ethereum ETF collateralization?

While the debate over whether to open Ethereum spot ETFs for staking to generate returns for users is still ongoing in the United States, asset management firm VanEck announced on the 21st of this month that the Solana Index-linked Exchange-Traded Note (ETN) it launched in the European market has successfully enabled staking. It was reported that the head of Fidelity's digital asset department believes that it is only a matter of time before Ethereum held in staking ETFs is opened up, and perhaps starting with the smaller-scale Solana ETN for experimentation would be a relatively gentle pace.

The head of Fidelity's digital asset department speaks extensively about Ethereum in staking ETFs, expressing confidence that it is "only a matter of time."

What is the difference between ETFs? ETNs mainly track price performance

Matthew Sigel, Head of Digital Assets at VanEck, announced on Twitter that the company has enabled staking for the Solana Index Exchange Traded Note (ETN) launched in the European market. Here's a brief introduction to ETNs:

Essentially, ETNs are unsecured debt instruments issued by financial institutions that track the performance of specific assets such as indices, commodities, or cryptocurrencies. They do not represent ownership of the underlying assets but rather track the price of a specific index, profiting or losing based on the asset's price fluctuations.

The risk of ETNs comes from the credit risk of the issuer. If the issuer goes bankrupt, investors may lose their positions. Additionally, ETNs do not involve actual asset transactions but rather invest based on the price movements of the underlying assets.

Passive income for investors, VanEck to charge 25% staking fee

VanEck describes staking rewards as passive income. VanEck's staking method is completely non-custodial, and the custodian of the ETN assets has full control over the staked assets, eliminating lending risks. Investors in Solana ETN do not need to take additional actions, as the earnings will be directly deposited into their accounts with daily settlements.

However, VanEck also highlights staking risks, such as the difficulty for investors to take advantage of price increases during the lock-up period, as staking terms often require users to lock their assets for a period of time. Additionally, if the price of the staked token drops, this could significantly impact staking returns. VanEck also acknowledges that this could be seen as unfavorable during a long bear market.

VanEck will collaborate with custodians to delegate the SOL held under the ETN to validator nodes for staking. They will work with qualified reputable nodes, but the SOL will remain in the custodian's cold wallet. By delegating to nodes, users can earn block rewards, MEV, and other income. However, 25% of this will be the staking fee charged by VanEck. The current asset size of VanEck's Solana ETN is approximately $75 million.