Ethereum (ETH) & Solana (SOL) Become Most Staked Crypto Assets

In Brief

• The market cap of all staked crypto assets reaches $94 billion, data from StakingRewards.com shows.
• 14,545,424 ETH is currently staked, although most of it is not profitable at current ETH prices.
• Staking raises the question of whether certain cryptocurrencies could be deemed securities.

The market capitalization of all staked crypto assets reaches almost $95 billion, with ETH and SOL leading the pack.

Ethereum (ETH) takes the trophy for the most staked crypto asset following the successful Merge of the Beacon Chain consensus layer with the Ethereum execution layer on Sep. 15, 2022, data from StakingRewards.com shows.

The network with the second-highest staking transaction market cap is Solana, with $12.7 billion. Hot on its heels is Cardano with over $11 billion, Binance Smart Chain with over $5 billion, and Avalanche with about $4.6 billion in locked assets. Rounding off the top ten blockchains are Polkadot, Cosmos Hub, Tron, Polygon, and Near Protocol. Of the top ten staked cryptocurrencies by market cap, Cosmos (ATOM) offers the highest yield of 17.89%.

Staking, the process of locking up crypto for an extended period to earn rewards, is also a way for transaction validators to jostle for a chance to add a new block to the blockchain. A deterministic algorithm selects a node that has staked the most crypto to validate transactions.

In contrast, mining involves competing for a chance to add a new block of transactions to the blockchain using an energy-intensive computational process that has drawn concern from many quarters, including the Biden administration.

Staking was introduced by blockchain developer Sunny King and Scott Nadal in a 2012 paper as an answer to bitcoin’s high energy consumption.

Ethereum leads staking as it seeks to become ‘sound money’
At press time, Ethereum, the world’s second-largest cryptocurrency by market cap, had 14,545,424 ETH staked, with 430,080 validators and an annual yield of 4.1% per annum. According to analytics firm Nansen, most of the ETH currently staked is not profitable at current Ethereum prices. At press time, Ethereum was trading at $1,360.79, according to Coingecko.
The recent migration of Ethereum from proof-of-work to proof-of-stake introduced a change in the issuance pattern of the cryptocurrency and the possibility of the cryptocurrency acquiring the status of “sound money” through the introduction of a supply cap.

Since the Merge, 3,095.12 ETH has been injected into the circulating supply. An accompanying “fee burn” mechanism controls the supply by removing ETH from circulation. Fee burn was introduced in Ethereum Improvement Proposal 1559 in Aug. 2021.

Withdrawing staked ETH to reap interest will not be possible until after the Shanghai upgrade in early 2023. To become a validator on the Ethereum network before the Merge required staking 32 ETH. Staking pools also allowed aspiring validators to enter the race by contributing as little as 0.01 ETH.

According to the U.S. Securities and Exchange Commission chairman, the migration of Ethereum to a proof-of-stake blockchain could mean that the coin passes the Howey Test, the principal test used to deem whether an asset is a security.

Multiple staking methods offered
Most cryptocurrencies that can be staked offer various ways to earn staking rewards. Ethereum offers solo staking or running your own validator node. Staking as a service removes the burden of running a validator node but allows a participant to reap the rewards. Using staking pools is another option, where stakers are issued a so-called ERC-20 liquidity token representing their staked ETH.

Solana, the second largest staked cryptocurrency by market cap, offers delegated proof-of-stake, where tokens are delegated to validators running nodes.

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