By Carol, PANews
It has been half a month since Ethereum successfully completed the Shanghai upgrade on April 12 and opened up staking withdrawals. Before the upgrade, market concerns focused on whether opening withdrawals would cause a large-scale selling pressure, leading to a drop in the price of the currency. But after the upgrade, this situation did not occur. Although the total amount of staking withdrawals has exceeded 1.7 million ETH as of April 26, the price of ETH has been on an upward trend recently, exceeding US$2,100 for many days, reaching its highest point since June 2022. At the same time, the total locked amount of DeFi on Ethereum has also remained basically stable, and the LSD and LSDFi protocols continue to be active.
This situation has caused another concern in the market, that the high staking rate of Ethereum may squeeze out other on-chain activities, which is not conducive to long-term development. So, how to understand the impact of Ethereum's staking rate? PANews data column PAData analyzed the current status of Ethereum's staking and withdrawal after the upgrade on April 26, as well as the staking rates and main application markets of staking certificates provided by various staking institutions/protocols, and found that:
1) After the upgrade, the total amount of Ethereum staking withdrawals is about 1.7242 million ETH, of which the total amount of full withdrawals accounts for about 44.23%, and the total amount of partial withdrawals accounts for about 55.77%. The total amount of withdrawals available is currently about 635,800 ETH, of which Binance accounts for about 30.20%.
2) Full withdrawals occur on a larger scale approximately every 5 days, and partial withdrawals are larger in the first 5 days (12th to 16th), and then decrease significantly.
3) Withdrawal structure is an important window to observe staking activities and market trends. If partial withdrawals are considered passive withdrawals (occurring automatically on a periodic basis) and full withdrawals are considered active withdrawals (actively exiting the node pool), then the current withdrawal structure shows that most institutions/protocols are mainly passive withdrawals, staking expectations are still relatively stable, and passive withdrawals are more likely to flow back, which may also be a motivation for the steady increase in staking amounts and coin prices.
4) After the upgrade, the total amount of staked increased by 387,200 ETH, an increase of about 2.13%, equivalent to an average daily increase of about 0.15%, slightly higher than the average daily increase of 0.13% in the year before the upgrade. Staking activities have become more active overall.
5) The average expected annualized staking yield of 18 staking institutions/protocols is about 5.45%, which is 4.27% higher than the "base rate". By category, the average expected annualized staking yield of the LSD protocol is the highest, at about 6.17%.
6) LSDFi threatens the negative feedback path built into Ethereum staking. When circular staking becomes a higher-yield use case, the increase in staking amount no longer leads to a decrease in staking returns, which may have a profound impact on the economic logic of Ethereum.
1.72 million ETH has been withdrawn, and an estimated 635,800 ETH is eligible for withdrawal
Ethereum staking withdrawals can be divided into full withdrawals and partial withdrawals. The former refers to withdrawing all 32 ETH after exiting the verification node, and the latter refers to withdrawing the staking rewards exceeding 32 ETH. Data shows that in the 15 days from April 12 to April 26, the total amount of Ethereum staking withdrawals was about 1.7242 million ETH, of which the total amount of full withdrawals was about 722,700 ETH, accounting for about 44.23%, and the total amount of partial withdrawals was about 961,600 ETH, accounting for about 55.77%.
In terms of design, Ethereum's withdrawal mechanism has a cycle of about 2-5 days. During this cycle, the excess staking (i.e., income) that meets the requirements will be automatically returned. Full withdrawals will also be affected by this cycle because they have to queue. From the current perspective, if 5 days is a small cycle, the scale of partial withdrawals during the first 5 days (12th to 16th) is large, and then it decreases significantly. Full withdrawals occur on a large scale every 5 days, such as on the 15th, 20th, and 24th. The full withdrawals on these 3 days are all above 160,000 ETH. Of course, this is also affected by the number of nodes that exit each day.
Judging from the withdrawals of various institutions/protocols, Kraken has withdrawn 598,800 ETH due to regulatory requirements, the highest withdrawal amount among all institutions/protocols. Secondly, the total withdrawals of Lido and Coinbase also exceeded 230,000 ETH. In addition, the total withdrawals of Huobi, stakefish, RocketPool, Staked.us and Figment also exceeded 10,000 ETH. Among them, except Huobi, the others are mainly partial withdrawals, and Lido is all partial withdrawals.
If partial withdrawals are considered passive withdrawals (occurring automatically on a periodic basis) and full withdrawals are considered active withdrawals (actively exiting the node pool), then the current withdrawal structure shows that most institutions/protocols are mainly passive withdrawals, staking expectations remain relatively stable, and passive withdrawals are more likely to flow back, which may also be a reason for the steady rise in coin prices.
From the perspective of the expected scale of future withdrawals, since withdrawals need to be converted to 0x01 certificates, estimates can be made based on the number of nodes that convert certificates. As of April 26, the total amount of withdrawals available for various institutions/protocols and major tagged addresses (such as Nansen-tagged DEX high-value transaction addresses and other single staking addresses) is approximately 635,800 ETH. Among them, Binance's total amount of withdrawals is approximately 192,000 ETH, accounting for approximately 30.20%. In addition, Coinbase's total amount of withdrawals is also relatively high, approximately 96,300 ETH, accounting for approximately 15.10%.
After the upgrade, the total amount of staking increased by 387,200 ETH, and the net outflow of staking amount on Kraken and Coinbase was high
After the Ethereum upgrade, the network operation is generally stable, and the total amount of staking has also increased from 18.1659 million ETH on the day of the upgrade to the current 18.5531 million ETH, a total increase of 387,200 ETH, an increase of about 2.13%, equivalent to an average daily increase of about 0.15%, slightly higher than the average daily increase of 0.13% in the year before the upgrade. This means that after the upgrade, Ethereum's staking activities have become more active overall.
From the perspective of daily month-on-month changes, the amount of Ethereum pledged also tends to be stable, and the daily month-on-month change rate shows a downward trend. Among them, only the 15th, 20th and 24th had a negative daily month-on-month change in the cumulative amount of pledged, and these three days corresponded to the peak period of full withdrawals, which also confirmed the impact of the withdrawal structure on pledges mentioned above from another perspective. Although from the current point of view, there is no correspondence between the scale of full withdrawals and the trend of spot prices in the secondary market on the same day, in the future, the scale changes of full withdrawals and their scale changes relative to partial withdrawals are still worthy of long-term attention.
Specifically, in terms of the changes in the amount of pledged by each institution/protocol, after the upgrade, the LSD protocol Lido attracted the most pledged amount, about 207,400 ETH, followed by Staked.us and stakefish in the StakingPool, which attracted 122,800 ETH and 92,700 ETH respectively. Among exchanges, OKX and Coinbase attracted pledged amounts of around 40,000 ETH.
If we consider the change in the net flow of the pledged amount (pledged amount - total withdrawal amount), then in addition to Kraken, Coinbase is the institution with the largest net outflow after the upgrade, with a net outflow of about 198,200 ETH. In addition, Lido and Huobi also have large net outflows, about 57,500 ETH and 29,200 ETH respectively. Staked.us, stakefish, OKX, Frax and RocketPool have large net inflows, all above 20,000 ETH, with the highest Staked.us reaching nearly 100,000 ETH.
The estimated average annualized staking yield is 5.45%, and the staking yield regulates on-chain activities
What factors directly affect the scale of staking? Obviously, it should be the expected annualized staking yield. Assuming that funds are all profit-seeking, when the expected annualized staking yield is high, re-staking (in terms of partial withdrawals) and less withdrawals (in terms of full withdrawals) are more likely to occur. The staking yield will become a criterion for regulating activities on the Ethereum chain.
Currently, Ethereum’s expected annualized staking yield is approximately 4.27% (32/sqrt(total number of validators)), and the expected annualized staking yield after adjusting for yield is approximately 3.86% (29.4021/sqrt(total number of validators)) [1]. As time goes by (the amount of stake increases), an exponential downward trend in the expected annualized staking yield can be seen.
In contrast, the interest rates of pledge products provided by various pledge institutions/protocols to users are higher than the above-mentioned "benchmark interest rate". The average expected annualized pledge yield of the 18 pledge institutions/protocols within the statistical scope is about 5.45%. By category, the average expected annualized pledge yield of the LSD protocol is the highest, about 6.17%. The second is StakingPool, with an average expected annualized pledge yield of about 5.81%. CEX has the lowest average expected annualized pledge yield, about 4.63%.
Among them, Huobi currently has the highest staking yield, as marketing activities provide an additional 10% return and USDT rewards. In addition, other institutions/protocols with returns exceeding 7% include Ankr, RocketPool and stakefish, and part of the excess returns may come from MEV.
Among the three different types of staking institutions/protocols, the most noteworthy one is the LSD protocol. These protocols previously solved the liquidity problem of the staked ETH by issuing staking certificates, and now these staking certificates provide users with higher income possibilities through DeFi "Lego".
For example, Lido, which has the highest amount of pledged funds, has 25.77% of its issued pledge certificates stETH packaged into wstETH according to Etherescan data. The latter’s main coin holding addresses include Aave, Balancer, Arbitrum Gateway, and Optimism Gateway, which means that users can participate in a wide range of DeFi activities through wstETH.
Another "Lego" that is more worthy of attention is re-staking, such as EigenLayer, Aura, Pendle, Agility, unshETH, ether.fi, etc. These LSDFi integrate the liquidity of LSD to provide users with ultra-high-yield mining pools or mortgage lending stablecoins. However, these protocols also threaten the negative feedback path built into Ethereum staking. When circular staking becomes a higher-yield use case, the increase in the amount of staking no longer leads to a decrease in staking income, which resets the economic logic of Ethereum and may have a more far-reaching impact than the liquidity crisis after the "mining accident" transmitted to Ethereum.
the data shows:
[1] This is based on the work of @dataalways and Ben Edgington, see https://eth2book.info/bellatrix/part2/incentives/issuance/#overall-issuance and https://dune.com/queries/2411779.
