Staking

Ethereum users have since shown a huge level of commitment to Ethereum 2.0 staking, even after the development phase 0 was launched. For this reason and more, a significant number of Ether (ETH) has been leaving the cryptocurrency exchanges, which is quite a good development for ETH in the long term, according to industry experts. Possibly, this could also be a factor contributing to the growing price of the second-largest crypto.

At the time of writing, Ether was trading at the price of US$1,226 on Coinmarketcap, a digital currency price tracking platform. The cryptocurrency now has a market capitalization above US$140 billion.

Milestone: 2% of ETH has Been Staked

According to the information shared on Thursday by Crypto Quant, a crypto analytics platform, the number of staked ETH on the Ethereum 2.0 deposit contract is worth two percent of the crypto’s current supply. This is another evidence that many Ethereum users are optimistic about the upcoming Eth2 network. That said, it’s worth noting that the current circulating supply is 114,154,295 ETH, and the staked two percent accounts for about 2.29 million ETH.

2% of $ETH supply is now staked in ETH 2.0 deposit contract. The total value staked is 2.29M $ETH.

View Chart 👉 https://t.co/oz0d3Ds8hq pic.twitter.com/EhsOUgcUGO
— CryptoQuant.com (@cryptoquant_com) January 7, 2021

These coins staked on the Ethereum 2.0 deposit contract cannot be withdrawn, at least until the next Eth2 development phase, thereby making the coins illiquid. Many experts relayed their thoughts that such development is quite healthy for ETH. Precisely, Ki Young Ju, the CEO of Crypto Quant, recently opined on Twitter that “illiquidity makes the ETH price go higher in the long-term.”

With the increasing staking rate for Eth2, Ki Young Ju had mentioned on Twitter that Ether “is the most undervalued asset in crypto finance.” On January 4th, all crypto exchanges’ ETH reserves decreased by 20 percent compared to May 2020. Evidently, some of these coins are flowing to the Ethereum 2.0 deposit contract, including decentralized exchanges (DEX) or for custody.

$ETH is the most undervalued asset in crypto finance.

(I'm a Bitcoiner tho) https://t.co/r7g7ky0gyv
— Ki Young Ju 주기영 (@ki_young_ju) December 8, 2020

“Whatever it is, it’s good for $ETH as decreasing market supply. Whales might use DEX for dumping, but at the same time, DEX drives Defi growth,” he added.

Illiquidity Issue With Eth2 Staking

Notably, the current Ethereum network is moving to a proof-of-stake (PoS) model with Ethereum 2.0. This transition is expected to be completed in four phases, one of which has been launched already. Although users can stake ETH on the network, these coins are considered illiquid due to the fact that it can’t be withdrawn, at least till the next Eth2 development phase launches.

Judging by this, many industry experts raise concerns that this might slow down the rate of ETH staking on the network. This is because many people would prefer to lock their coins in crypto exchanges for trading or in decentralized finance (DeFi) yield farming protocols to make even more profit than staking. Besides, they can choose to withdraw these coins anytime, anywhere, unlike when they are staked.

For this reason, Lido planned to introduce a liquid staking service for Ethereum 2.0.

Lido Prepares for Mainnet Launch

The Eth2 staking service provider intends to achieve this liquidity by issuing an ERC-20 token, stETH, for any ETH staked on the network. This will serve as the tokenized version of the coins staked, as well as in value. Lido noted that stETH could be traded on exchanges and also used in DeFi protocols for yield farming. In this way, the Ethereum users have nothing to lose, as they will receive an equivalent token for any coin they stake.

With the US$2 million fundraise, Lido is preparing to debut the Eth2 liquid staking mainnet later this month. There are possibilities that this service will go mainstream in the coming year.