Staking has quietly become one of the most important revenue engines and governance levers in crypto. This report unpacks how the market evolved, who’s winning, and what comes next.

Key insights covered in this report:

• $15B+ in annual rewards (2024). Staking is already a massive yield source.

• $200B+ in assets staked (Q1 2025). With ETH and SOL leading the charge.

• ETH and SOL now generate ~50% of total staking rewards. Up from ~30% just a few years ago.

• Validator economics = volume x pricing power x retention. And not all sources of stake are created equal.

• CEXs are best positioned. Massive retail reach, low price sensitivity, and the ability to monetize passive holders.

• Coinbase made $705M from staking in 2024, up 113% YoY. And charges up to a 35% commission.

• Success isn’t about infra alone. It’s a game of attracting and retaining stake from the right sources: institutions, foundations, CEX users, and liquid staking protocols.

• Governance power is consolidating. Top validators now influence major network decisions (see: SIMD-228).

• Staking will power more than L1s. Expect adoption across L2s and DeFi protocols, blending yield and governance.

The report is structured across:

• Staking 101. A quick primer on staking, how it works, and why it's central to PoS blockchain security and yields.

• Historical context. The evolution of staking across three phases: Past (emergence), Present (maturity), and Future (yield, governance, and value capture).

• Succeeding as a staking business. A look at the core levers that determine validator performance: volume, pricing power, and stake retention.

• Competitive landscape. A taxonomy of staking players (CEXs, custodians, professionals, community validators), highlighting their differences in positioning.

• Business case: Coinbase. A deep dive into Coinbase’s staking revenues, user strategy, governance moves, and validator operations.

• Generalizing the playbook. A summary of the key steps for institutions or fintechs entering the staking market, based on observed patterns.

Staking 101

A blockchain reaches agreement using a consensus mechanism. Proof of Stake (PoS), today's dominant consensus model, lets users pledge collateral (stake) to validators who propose and vote on blocks. These blockchains gain security from staking, as greater stake raises the cost of network attacks. Stakers receive rewards—a mix of inflation and fees—in return.

Staking unlocks yield for major crypto assets, effectively risk-free. It suits long-term holders seeking extra gains with minimal risk.

Running a validator and attracting stake lets one share in the network's success as its Real Economic Value (REV = MEV + fees) grows.

Historical context

The staking industry took off with the transition of Ethereum to PoS, and its consolidation as a major blockchain. Since then, it has been growing and maturing with the proliferation of new chains, most notably Solana.

In our view, there’s three distinct periods that characterize the staking industry:

• Past: from the inception of PoS in the mid 2010s until 2023.

• Present: from 2024 until today (2025).

• Future: a gradual transition from today onwards.

Past – A nascent revenue opportunity

PoS chains started seeing traction and value appreciation during the 2020-21 hype cycle, thereby giving rise to the staking industry.

By 2023, Staking had shown it was here to stay:

1. One major PoS asset: ETH.

2. Next-gen PoS entrants start emerging: SOL, BNB, SUI.

3. Annual rewards cross $1bn in 2020, peaking beyond $15b during the 2021 bubble.

Present – Entering maturity

Today, most of the major assets can be staked. This includes even Bitcoin, which can be staked via Babylon. The total value staked from the top 20 staked assets in 2024 already surpassed $200bn:

This translates to nearly $15bn in annual rewards, not too far from the 2021 cycle peak. Approximately, $1.5-3bn of that went to staking providers.

The distribution and composition of top staked assets between 2021 and 2024 also changed significantly:

1. ETH + SOL have gone from 30% to 50% of the total rewards.

2. Next-gen chains have replaced many of the top 20 assets by $ rewards volume.

Future – Driver for value capture and governance

We expect all new chains to be PoS based, with non-PoS chains supporting staking in one way or another, as we have seen with Bitcoin and Babylon.

As more economic value shifts onchain, real rewards will increase, in the native denomination but even more so in $ terms as the underlying fundamentals improve. Solana’s rise during 2024 and Q1 2025 gives us a glimpse of this phenomenon, with REV fueled staking revenue driving an expansion of yield:

We also expect staking to become a more prevalent mechanism in crypto to incentivize governance and reward long term token holding not only with L1s, but also with L2s and protocols (e.g. Starknet , Aave respectively).

Finally, accruing governance power will become increasingly important (i.e. see the recent SIMD-228 vote controversy), akin to holding a vote for the new Internet, and strategic to many players in the crypto ecosystem.

Succeeding as a staking business

Staking is a winner-takes-some competition, enabling a rich ecosystem of thriving staking operations. Running a validator is a necessary but insufficient condition to build a successful staking operation. Most importantly, one must be able to attract stake, which may come from various sources:

• Foundations. Each Blockchain has a foundation which delegates tokens to incentivize and reward validators operated by teams that contribute to the network.

• Institutions. Large holders of tokens, directly or through custodians.

• Retail (CEX). Individuals who interface with crypto in a limited fashion through centralized exchanges.

• Retail (onchain). Individuals who hold assets in their own wallet and interact with blockchains to perform actions.

• LSTs. Liquid staking tokens, which represent liquid staked positions underpinned by a limited set of validators.

To understand the quality of each source of stake, it’s important to realize that staking is a volume, pricing power & retention game:

1. Volume. Validator revenue margins typically range between 4% and 0.5% of AUM p.a. Opex is usually constant regardless of stake size. So it’s all about stake volume.

2. Pricing power. Some sources of stake tolerate higher commissions than others. Mostly a matter of competition and switching costs.

3. Retention. Stickiness matters. It is a function of time horizons, risk appetite, savviness, among other things.

The relationship between each source of stake and their key dimensions can be summarized as:

Competitive Landscape

The staking market is composed of a few different categories of players. The table below shows our perspective on the main archetypes along their likely sources of stake:

We conclude that the biggest opportunity in the current adoption cycle is for CEX entities (or Fintechs with a retail crypto custody component) to enter the staking market.

Business case: Coinbase

Quantitative factors

In their Q4 ‘24 letter, Coinbase reported $705m in staking revenues during 2024, up from $331m in 2023, $275m in 2022 and $223m in 2021.

As of 13th March, we estimate that Coinbase has:

1. 3.8M ETH ($7.5B) staked, generating $230M in annual staking yield.

2. 14.3M SOL ($1.8B) staked, generating $180M in annual staking yield.

In terms of their historical performance, and that of their CEX peers, their generated staking rewards have largely been growing consistently. For instance, this is for ETH + SOL:

If we aggregate the data above with a 12 month rolling window to project their generated annual rewards over time, we generally see a constant uptrend:

The chart below shows their ETH rewards month-over-month in USD terms, which have been dampened in the recent months by poor price action:

And their corresponding SOL rewards:

Qualitative factors

Pricing power

Coinbase’s standard commission on staking rewards is 35%. For comparison, most foundations require commissions below 10%, and in some cases 5%.

Coinbase can afford setting higher commissions due to its unsophisticated retail user base with high switching costs. Their take-rate on sophisticated users / institutions is lower, ranging from 25% to 10%.

Monetizing “hodlers”

Staking is not only complementary to the core business, but also higher LTV than trading fees for casual spot users with low trade frequency and long time holding horizons.

Additionally, Coinbase creates “hodlers” via their Learn To Earn program as a customer acquisition strategy (CEX version of Galxe, Layer3) subsidized by protocols, who pay for the campaign (CEX fee + tokens). These new token holders can stake their tokens and potentially buy more once educated.

Governance

By accumulating the network’s native token, Coinbase has amassed considerable governance power, which they can exert to demonstrate alignment and potentially sway the network in their best interest. For instance, they were the 4th largest voter in Solana’s highly controversial SIMD-228, and have been leveraging their participation for marketing purposes or to protect their interests.

Kraken is another example of a CEX commanding a significant stake and using it in key governance votes.

Timeline

Piecing together public information, we think this timeline roughly reflects Coinbase’s progress in the staking sector:

1. 2019: Launched staking

   1. First offered staking services on March 29, 2019 – initially through its institutional arm, Coinbase Custody. Later that year, shipped to all users.

   2. Internal team, one single asset (Tezos).

2. 2020: Partnered with Bison Trails

   1. Leverage a third party to offer Polkadot staking.

3. 2020: Adding more assets

   1. After introducing Tezos in 2019, announces support for Cosmos and Ethereum staking.

4. 2021: Acquired Bison Trails: $450m

   1. Acquired for the team and distribution as well as technical know-how.

5. 2021: Acquired Unit410

   1. Acquired Unit410, a staking infrastructure lab known for their cutting edge research and open source contributions.

   2. This allows them to support strategic chains, and similar to Governance work, can be leveraged as a marketing tool through their open source contributions.

6. 2022: Coinbase Developer Platform

   1. Created to be the AWS of crypto, offering a suite of services towards third party applications, including staking.

   2. Unlocks additional sources of stake outside of Coinbase. Example: Alluvial integration.

7. 2022: LST launch

   1. Coinbase announces their first LST, on Ethereum.

   2. 146k ETH, roughly 5% of their staked ETH (as of March 2025).

8. 2023: Partner with Kiln as third party provider

   1. Offer native ETH staking via Kiln on Coinbase Wallet.

   2. As of 2025, >10% of their ETH is staked with partners.

Sizing the opportunity

Prospective CEX’s and Fintechs may be questioning how applicable the Coinbase benchmark is to their business. A more abstract way to model and project staking revenues is simply as a function of AUM staked, commission (i.e. take-rate) and reward rate (i.e. yield APR)

The table below summarizes the relationship between the key factors, expressed in millions of dollars ($M):

Generalizing the playbook

In our view, this is the high level playbook that a new CEX or Fintech wanting to enter the staking business should be considering:

1. Launch limited staking offering

   1. Initially support one or very few asset(s), whichever most critical.

   2. Potentially partnering with a staking business that is already operational to accelerate roll out while de-risking launch.

2. Expand staking offering

   1. Improve internal support for key assets, eliminating third party dependencies to reduce counterparty risk and increase profit margins.

   2. Increase asset coverage, if needed through external partners.

3. Grow staker user-base

   1. Improve product offering to create new sources of stake, whether through “learn to earn” programs, dedicated LSTs, developer API / SDKs or own wallet.

   2. Build external presence, grow community goodwill and increase brand value via governance participation, potentially also ‘public good’ contributions (publishing analyses and research, open source development).

That said, the devil is in the details. There are many aspects that are a lot more particular to each business which we left out of this report’s scope, but are always open to discuss. Reach out to hi@firstset.xyz if you have any questions.

About Firstset

We are a crypto native staking firm focused on supporting the blockchains of tomorrow, primarily through validation services. We currently manage $20M in staked assets across several chains, most notably Ethereum, Solana and Babylon.

Sometimes we also publish research (e.g. SIMD-228 explainer and impact analysis, Lido CSM analysis) and contribute open source software (e.g. Lido CSM CLI, Tenderduty).