The value of a blockchain network comes from its ability to act as a settlement layer, securely adding new transactions to the decentralized ledger. This ability hinges on widespread and decentralized network participation — hence, a PoS blockchain is only as secure as the number of tokens being staked, essentially being put to work to verify transactions. Passively holding PoS tokens and not staking them subtracts from the value of the network, which is out of line with the interests of investors.

Unfortunately, this means that growth in assets under the management of PoS ETPs will represent a decreasing share of the token supply being staked, along with less secure blockchains. As institutional capital floods into passive PoS ETPs, the portion of total supply being staked falls, causing staking incentives to increase, and worsening the inflationary effects for passive holders. If institutional investment is going to drive the growth of PoS token markets, it will need to participate in the networks in addition to owning them.

The value of a blockchain network comes from its ability to act as a settlement layer, securely adding new transactions to the decentralized ledger. This ability hinges on widespread and decentralized network participation — hence, a PoS blockchain is only as secure as the number of tokens being staked, essentially being put to work to verify transactions. Passively holding PoS tokens and not staking them subtracts from the value of the network, which is out of line with the interests of investors.

Unfortunately, this means that growth in assets under the management of PoS ETPs will represent a decreasing share of the token supply being staked, along with less secure blockchains. As institutional capital floods into passive PoS ETPs, the portion of total supply being staked falls, causing staking incentives to increase, and worsening the inflationary effects for passive holders. If institutional investment is going to drive the growth of PoS token markets, it will need to participate in the networks in addition to owning them.