Binance Research: Ethereum staking ratio still far below major public chains
Binance Research Report illustrates the current state of Ethereum staking with diagrams, evaluates the potential unlocking phenomenon after the Shanghai upgrade, but seems to lean more towards a bullish view on the unlocking event.
Table of Contents
Current Situation
1. Staking Ratio
Lido: 29.2%
Independent Stakers: 24.9%
Coinbase: 12.6%
Kraken: 7.5%
Binance: 6.1%
Others: 19.7%
2. Potential Selling Pressure
The report points out that liquidity staking protocols like Lido, Rocket Pool, as well as Binance and Coinbase provide staking certificates BETH and cbETH to users when staking.
Therefore, over 57% of ETH stakeholders already have liquidity and can sell at any time. There is no reason to believe that these individuals will immediately sell ETH after the Shanghai upgrade.
Similar to previous reports, only 30% of stakers are in profit, with over 70% having a cost basis higher than the current ETH price.
Binance Research believes that most stakers are in a loss position and have no economic incentive to sell.
Opportunities After the Shanghai Upgrade
1. Negative Correlation between Personal Staking Rewards and Total Staked
The report states that staking rewards are inversely related to the total amount of ETH staked.
More ETH flowing into the staking validation mechanism means that the ETH rewards each validator can receive are diluted.
2. Extremely Low Ethereum Staking Ratio
Binance Research believes that some groups are waiting to stake ETH after the Shanghai upgrade, as opening up withdrawals means:
Eliminating liquidity risk
Eliminating uncertainty about the undefined lock-up period
Especially with Ethereum's energy consumption dropping by 99% after The Merge, it can attract institutional investors more in terms of ESG narratives.
3. Is Ethereum Heading towards Deflation?
One of the most significant impacts of The Merge is the issuance amount. After Ethereum transitions to PoS, the daily issuance and rewards paid to validators decrease significantly, coupled with the burning mechanism implemented by EIP-1559, ETH inflation rate drops from 3.5% to -0.03%.
Risks Facing Ethereum
Overall, Binance Research's report seems to lean towards a bullish outlook on the unlock event, but it also mentions the rise of major public chains:
Since November 2020, Ethereum's TVL dominance has dropped from 96% to 60%
BNB Chain has grown from 0.1% to 10.2%
Tron has grown from 2.1% to 10.4%
Aside from public chains like Avalanche and Solana rising during the last bull market, Polygon, Arbitrum, and Optimism also occupy the top ten in TVL. Furthermore, emerging chains like Canto and Sei, how Ethereum's dominance in DeFi will change in the future is definitely worth paying attention to.