A new JPMorgan report has revealed that the launch of the Ethereum 2.0 network will take the lid of the proof-of-stake (PoS) consensus mechanism and make staking yields a more attractive and steady source of income for both institutional and retail investors.
JPMorgan analysts are expecting payouts more than double to over $20 billion after Ethereum completes its transition from proof-of-work (PoW) to proof-of-stake (PoS) next year, with the current holders of staked coins of proof-of-stake blockchains currently generating an estimated $9 billion in revenue annually from their staked holdings. The analysts at JPMorgan also project staking yields across the blockchain industry to double again to $40 billion by 2025 after the next phase of the energy-efficient Ethereum 2.0 is unveiled.
The two senior analysts who believe that proof-of-stake coin yields are attractive investments also compared the financial incentives with staked cryptocurrencies to cash, cash equivalents, and fixed income instruments like US Treasury bonds. “Yield earned through staking can mitigate the opportunity cost of owning cryptocurrencies versus other investments in other asset classes such as US dollars, US Treasuries, or money market funds in which investments generate some positive nominal yield. In fact, in the current zero rate environments, we see the yields as an incentive to invest,” they said in the report.
According to StakingRewards, annual staking rewards on the current top ten cryptocurrencies range from 3% to as high as 13%. Although these are nominal yields, their real Return on Investment is also a function of the market exchange value of the underlying currency. JPMorgan analysts also highlighted the positive real yields of PoS coins, in addition to any expected market price appreciation attractive.
“Not only does staking lower the opportunity cost of holding cryptocurrencies versus other asset classes, but in many cases, cryptocurrencies pay a significant nominal and real yield,” they stated.
Ethereum 2.0 now has 10 times more staked Ether to power its proof-of-stake mechanism than the Ethereum Foundation required at the launch at the beginning of the year. The Ethereum Launchpad which is the portal for Ethereum 2.0 and allows validators to stake their coins, revealed that 5.9 million staked Ether alongside almost 180,000 validators powering the blockchain. At Eth’s current price level, the 5.9 million staked Ether is worth almost $12.29 billion in market exchange value, a figure which shows a significant jump from that of six months ago.
According to the Ethereum Foundation, validators “are responsible for storing data, processing transactions, and adding new blocks to the blockchain.” The current value of staked ETH now amounts to $12.7 billion, up from the $1.1 billion ETH staked (1.6% of Ethereum supply) in December last year. There is roughly 5% of the supply of ETH currently being staked.