When we talk about utility of a specific cryptocurrency, staking is always one of them. However, unlike many other shitcoins which use staking as the name of Ponzi reward distribution, Ethereum staker provide network security to its blockchain and in return rewarded negligible amount of ETH. This provides a sustainable model where staker get rewarded not in the expense of diluting other ETH holders by burning part of the network transaction fee and result in overall deflationary in supply, you cannot see the same model from other blockchain because Ethereum is the only blockchain that charge users higher fee, but still own majority of the market share. This model allows wealth to redistribute fairly within the network.

When more and more people understand the power of staking, there is no surprise ETH staking is growing at a rapid pace. More than 64% YoY growth and estimated to mature at 2026 with staking ratio approximately 30% or around 35.5 million ETH staked.

Why this number? Because Ethereum issuance changed according to the number of validators, and estimate once past 35.5 million ETH staked, number of validators will cross 1.1 million and result in diminishing issuance APR of 2.8%. Arguably, when issuance APR is dropped below 3%, holders will have the phycological barrier of hesitation to buy ETH just for the staking reward.

So why aren't we predicting the matured staking ratio to be below 30%, that is because we took in the consideration of increasing validator revenue from fees including base fees, priority fees and MEV. We estimate the average YoY growth for base and priority fee in the next 2 years to be more than 50% before Stateless stage which increases the layer throughput with slot time increased from 12s to 16s. Therefore, we estimated ETH annual revenue with be saturated at 6.2% in 2026 with staking ratio of 30%.

This assumption is made on people are comfortable with 6.2% APR with the imbedded risk associated and demisting interest with diminishing reward. However, 30% staking ratio is considered low if comparing to other L1 blockchain with average 50% staking ratio and only BNB has staking ratio below 30%. Besides, as the #2 crypto, ETH need massive amount of liquidity to facilitate trading and on-chain activities which ETH in contracts already consist of 12.6% or approximately 15.2 million ETH today.

Therefore, despite increasing competition in staking services protocol, we will likely have staked ETH growing on average 30% YoY until 2026. Other notable research from Delphi Digital estimated the staking ratio will be peaked at 25% by 2025.

Liquid Staking Derivative is the staking service provided by 3rd party because running a single validator is required not only certain hardware and effort, minimum 36 ETH also act as the barrier for a lot of people to become a validator. These platforms then took the opportunity to become validator with pooled ETH, saving holders effort, in return they earn a part of the reward as commission.

Among all the available LSD, first we did some filtering to remove low trading volume LSD and non-Liquid excluding CEX issued token. Below are the top 13 LSD tokens and its detail ending March 2023.

In order to take advantage of this sector, we can either invest in the native token or stake ETH. The APY displayed here is not the maximum APY you able to farm, without leverage (sturdy.finance or $icETH), looping or compounding. sfrxETH has the obvious advantages compare to other LSD with its unique design leveraging additional staking from frxETH to be eligible for the reward distribution and bribing for higher Curve gauge distribution to frxETH/ETH LP. With this design, sfrxETH holders able to earn more staking reward from holders that gave up the staking reward and deposit into the LP position in Curve.

On the other hand, in term of investing the protocol native token, it is definitely a tricky approach. First, I am not a fan of governance token, especially "pure" governance token without other utility feature that can accrued value (either in locking up supply, burning supply or real-yield distribution). The 13 tokens above have no revenue redirect nor changes in the native token supply from the increase adoption of the LSD protocol. Arguably, with high adoption irrational speculator will still pump the native token or indirect benefit to the native network for example Frax ecosystem, StaFi chain and Bifrost chain. I would rather see native token has the direct accrued value result of the growth of its LSD adoption, because of this I have to mention the upcoming star, Stader ($SD) and Ankr.

Staking $SD will be allowed to receive a proportional share of protocol revenues, and a portion of the revenue is dedicated to buy back $SD. Although I am the kind of person who prefer native reward tokens than buyback, but it definitely is stepping into the right direction. Another utility including $SD bond requirement for running nodes.

The protocol also provides unique services such as decentralized pool competing with Rocket Pool and lower barrier of 4 ETH bond, instead of just "another" LSD. However, the tokenomics would be needed to monitor after releasing of ETHx, to determine if the yield provided enough to attract stakers, and yield generated and projection from the service worth risk exposure to the low circulating supply native token. All these worth a separate article to address.

Beside all these, I would rather see more DeFi application on LSD, including decentralized stablecoin that backed by LSD like $DINERO by Redactedcartel, FRAX and DAI exiting from centralized stablecoin dependency, Raft Finance, dApps integration (Aave v3 wstETH), EigenLayer for restaking and so on. All of these give further value to stake ETH on top of providing security to Ethereum network.

Timbeiko confirmed upgrade is scheduled on 12th April 2023.

What should we expect from the upgrade? Will the price action be as disappointed as The Merge? Will people view it as a de-risking factor or a bullish upgrade to attract institution or withdrawal pressure? What we know currently is there is approximately 18 million ETH staked, Lido is the largest staker with approximately 5.6 million ETH staked and Lido are not expecting withdrawal enable until all audits are completed, estimating end of April. No further update given yet.

Estimate US stakers especially Kraken (1.2million ETH staked) & Celsius (158k ETH staked) are expected to fully withdrawn because of pressure from SEC and bankruptcy proceeding.

In term of the withdrawal process, validators in the 0x00 pool who have requested to switch their credentials from 0x00 to 0x01 will begin to fill the pool changing the composition over time. Both of these operations happen at a rate of 16 validators per block.

This would result in the profile will peak after 70 hours (Assume everyone is converting to 0x01.) and will last for another 2 days for full withdrawal.

Therefore, we can reasonably believe that even if estimated 73% of ETH stakers are underwater, stakers who plan to withdraw will have done withdrawal after day 5 or 6, and another wave of withdrawal after Lido audits are completed.

Another insight worth noting is VC including Jump, Wintermute, Paradigm and DeFiance Capital have relatively large position of LDO. Increasing the chance of these large holders dumping on the event.

Despite the potential selling pressure after Shapella, I will still view it as a bullish event in longer term. Further development of LSD and growing adoption of LSD in DeFi application would be exciting to watch.

When we talk about utility of a specific cryptocurrency, staking is always one of them. However, unlike many other shitcoins which use staking as the name of Ponzi reward distribution, Ethereum staker provide network security to its blockchain and in return rewarded negligible amount of ETH. This provides a sustainable model where staker get rewarded not in the expense of diluting other ETH holders by burning part of the network transaction fee and result in overall deflationary in supply, you cannot see the same model from other blockchain because Ethereum is the only blockchain that charge users higher fee, but still own majority of the market share. This model allows wealth to redistribute fairly within the network.

When more and more people understand the power of staking, there is no surprise ETH staking is growing at a rapid pace. More than 64% YoY growth and estimated to mature at 2026 with staking ratio approximately 30% or around 35.5 million ETH staked.

Why this number? Because Ethereum issuance changed according to the number of validators, and estimate once past 35.5 million ETH staked, number of validators will cross 1.1 million and result in diminishing issuance APR of 2.8%. Arguably, when issuance APR is dropped below 3%, holders will have the phycological barrier of hesitation to buy ETH just for the staking reward.

So why aren't we predicting the matured staking ratio to be below 30%, that is because we took in the consideration of increasing validator revenue from fees including base fees, priority fees and MEV. We estimate the average YoY growth for base and priority fee in the next 2 years to be more than 50% before Stateless stage which increases the layer throughput with slot time increased from 12s to 16s. Therefore, we estimated ETH annual revenue with be saturated at 6.2% in 2026 with staking ratio of 30%.

This assumption is made on people are comfortable with 6.2% APR with the imbedded risk associated and demisting interest with diminishing reward. However, 30% staking ratio is considered low if comparing to other L1 blockchain with average 50% staking ratio and only BNB has staking ratio below 30%. Besides, as the #2 crypto, ETH need massive amount of liquidity to facilitate trading and on-chain activities which ETH in contracts already consist of 12.6% or approximately 15.2 million ETH today.

Therefore, despite increasing competition in staking services protocol, we will likely have staked ETH growing on average 30% YoY until 2026. Other notable research from Delphi Digital estimated the staking ratio will be peaked at 25% by 2025.

Liquid Staking Derivative is the staking service provided by 3rd party because running a single validator is required not only certain hardware and effort, minimum 36 ETH also act as the barrier for a lot of people to become a validator. These platforms then took the opportunity to become validator with pooled ETH, saving holders effort, in return they earn a part of the reward as commission.

Among all the available LSD, first we did some filtering to remove low trading volume LSD and non-Liquid excluding CEX issued token. Below are the top 13 LSD tokens and its detail ending March 2023.

In order to take advantage of this sector, we can either invest in the native token or stake ETH. The APY displayed here is not the maximum APY you able to farm, without leverage (sturdy.finance or $icETH), looping or compounding. sfrxETH has the obvious advantages compare to other LSD with its unique design leveraging additional staking from frxETH to be eligible for the reward distribution and bribing for higher Curve gauge distribution to frxETH/ETH LP. With this design, sfrxETH holders able to earn more staking reward from holders that gave up the staking reward and deposit into the LP position in Curve.

On the other hand, in term of investing the protocol native token, it is definitely a tricky approach. First, I am not a fan of governance token, especially "pure" governance token without other utility feature that can accrued value (either in locking up supply, burning supply or real-yield distribution). The 13 tokens above have no revenue redirect nor changes in the native token supply from the increase adoption of the LSD protocol. Arguably, with high adoption irrational speculator will still pump the native token or indirect benefit to the native network for example Frax ecosystem, StaFi chain and Bifrost chain. I would rather see native token has the direct accrued value result of the growth of its LSD adoption, because of this I have to mention the upcoming star, Stader ($SD) and Ankr.

Staking $SD will be allowed to receive a proportional share of protocol revenues, and a portion of the revenue is dedicated to buy back $SD. Although I am the kind of person who prefer native reward tokens than buyback, but it definitely is stepping into the right direction. Another utility including $SD bond requirement for running nodes.

The protocol also provides unique services such as decentralized pool competing with Rocket Pool and lower barrier of 4 ETH bond, instead of just "another" LSD. However, the tokenomics would be needed to monitor after releasing of ETHx, to determine if the yield provided enough to attract stakers, and yield generated and projection from the service worth risk exposure to the low circulating supply native token. All these worth a separate article to address.

Beside all these, I would rather see more DeFi application on LSD, including decentralized stablecoin that backed by LSD like $DINERO by Redactedcartel, FRAX and DAI exiting from centralized stablecoin dependency, Raft Finance, dApps integration (Aave v3 wstETH), EigenLayer for restaking and so on. All of these give further value to stake ETH on top of providing security to Ethereum network.

Timbeiko confirmed upgrade is scheduled on 12th April 2023.

What should we expect from the upgrade? Will the price action be as disappointed as The Merge? Will people view it as a de-risking factor or a bullish upgrade to attract institution or withdrawal pressure? What we know currently is there is approximately 18 million ETH staked, Lido is the largest staker with approximately 5.6 million ETH staked and Lido are not expecting withdrawal enable until all audits are completed, estimating end of April. No further update given yet.

Estimate US stakers especially Kraken (1.2million ETH staked) & Celsius (158k ETH staked) are expected to fully withdrawn because of pressure from SEC and bankruptcy proceeding.

In term of the withdrawal process, validators in the 0x00 pool who have requested to switch their credentials from 0x00 to 0x01 will begin to fill the pool changing the composition over time. Both of these operations happen at a rate of 16 validators per block.

This would result in the profile will peak after 70 hours (Assume everyone is converting to 0x01.) and will last for another 2 days for full withdrawal.

Therefore, we can reasonably believe that even if estimated 73% of ETH stakers are underwater, stakers who plan to withdraw will have done withdrawal after day 5 or 6, and another wave of withdrawal after Lido audits are completed.

Another insight worth noting is VC including Jump, Wintermute, Paradigm and DeFiance Capital have relatively large position of LDO. Increasing the chance of these large holders dumping on the event.

Despite the potential selling pressure after Shapella, I will still view it as a bullish event in longer term. Further development of LSD and growing adoption of LSD in DeFi application would be exciting to watch.