The spotlight during the past week has continued to shine on Bitcoin – and with good reason. There were ongoing positive developments surrounding the flurry of new spot BTC ETF filings in June, which resulted in a number of major institutions (Blackrock, Fidelity, etc.) updating and resubmitting their filings to include custodians and BTC spot price surveillance mechanisms. As a result, enthusiasm continues to build towards a spot BTC ETF approval, and BTC continues to lead the charge in the crypto markets. This is evidenced by the ETH/BTC ratio, which has flatlined at the 0.60 level – this is the lowest level for the ETH/BTC ratio since July 2022.
Nevertheless, although “alt-coins” are under pressure relative to BTC (especially since several prominent alt-coins were alleged to be securities in recent SEC enforcement actions), Ethereum has arguably graduated from being an alt-coin to an institutional grade asset. ETH’s status as a commodity vs a security is hotly debated, whereas there is a more consensus view that many other tokens are true securities. Additionally, ETH beginning as Proof of Work before switching to Proof of Stake during the Merge provides an argument that ETH is potentially “sufficiently decentralized” and differentiated from other tokens.
Therefore, although the BTC ETF is likely to drive the crypto narrative in the near and medium term, ETH could emerge as the next institutional grade asset shortly thereafter. Part of the adoption thesis is driven by ETH being a differentiated asset to BTC: while BTC is “digital gold,” ETH represents a software platform akin to the ”App Store” with a token that has native staking yield. Other than Proof of Stake consuming less power / energy than Proof of Work and offering more potential blockchain security than mining, Proof of Stake has also introduced a staking yield that could be a foundational reason for institutional participation in ETH. In this piece, we give an overview of the ETH staking economics and landscape.
ETH’s staking yield is based on the “Ethereum economy” – or more specifically, from the activity of users and apps that use the Ethereum network. This is highly analogous to how US interest rates are based on activity in the US economy; in times of high growth + high inflation, US rates are raised (as we are seeing now), and in periods of low growth + recession, US rates are lowered (as we see during crises like 2008 and 2020). Ethereum’s staking yield programmatically achieves a similar result without the use of middlemen.
Unlock exclusive insights with our cutting-edge digital finance platform. Gain access to next-gen data analytics and digital asset products crafted with applied science. Subscribe now to stay ahead of the curve.
The spotlight during the past week has continued to shine on Bitcoin – and with good reason. There were ongoing positive developments surrounding the flurry of new spot BTC ETF filings in June, which resulted in a number of major institutions (Blackrock, Fidelity, etc.) updating and resubmitting their filings to include custodians and BTC spot price surveillance mechanisms. As a result, enthusiasm continues to build towards a spot BTC ETF approval, and BTC continues to lead the charge in the crypto markets. This is evidenced by the ETH/BTC ratio, which has flatlined at the 0.60 level – this is the lowest level for the ETH/BTC ratio since July 2022.
Nevertheless, although “alt-coins” are under pressure relative to BTC (especially since several prominent alt-coins were alleged to be securities in recent SEC enforcement actions), Ethereum has arguably graduated from being an alt-coin to an institutional grade asset. ETH’s status as a commodity vs a security is hotly debated, whereas there is a more consensus view that many other tokens are true securities. Additionally, ETH beginning as Proof of Work before switching to Proof of Stake during the Merge provides an argument that ETH is potentially “sufficiently decentralized” and differentiated from other tokens.
Therefore, although the BTC ETF is likely to drive the crypto narrative in the near and medium term, ETH could emerge as the next institutional grade asset shortly thereafter. Part of the adoption thesis is driven by ETH being a differentiated asset to BTC: while BTC is “digital gold,” ETH represents a software platform akin to the ”App Store” with a token that has native staking yield. Other than Proof of Stake consuming less power / energy than Proof of Work and offering more potential blockchain security than mining, Proof of Stake has also introduced a staking yield that could be a foundational reason for institutional participation in ETH. In this piece, we give an overview of the ETH staking economics and landscape.
ETH’s staking yield is based on the “Ethereum economy” – or more specifically, from the activity of users and apps that use the Ethereum network. This is highly analogous to how US interest rates are based on activity in the US economy; in times of high growth + high inflation, US rates are raised (as we are seeing now), and in periods of low growth + recession, US rates are lowered (as we see during crises like 2008 and 2020). Ethereum’s staking yield programmatically achieves a similar result without the use of middlemen.
Ethereum, like Bitcoin, has protocol issuance of tokens which is paid out to participants that secure the blockchain by verifying transactions. For BTC, these are the miners, who are paid the BTC block subsidy (which is essentially a “yield” on the equipment/power investment a miner makes). For ETH after the Merge, these are the validators who stake their ETH and receive an ETH block subsidy for doing so. Issuance is a key part of the ETH staking yield.
Ethereum, like Bitcoin, also pays transaction fees to validators/miners. This comprises the other major part of the ETH staking yield. The difference is – Bitcoin is mainly used as a store of value rather than a means of payment, and BTC fees are therefore relatively small compared to the block subsidy. BTC will likely need to be subsidized by issuance for the foreseeable future unless an economy of users and apps develops on Bitcoin. Ethereum has the potential to have its network security “subsidized” entirely by transaction fees due to the blossoming economy of DeFi, NFTs, payments, gaming, L2s, and other smart contracts being built in the ecosystem.
Finally, we will examine different ways to participate in ETH staking, whether through solo staking or using pools.
Purpose
This research is only for the clients of BitOoda. This research is not intended to constitute an offer, solicitation, or invitation for any securities and may not be distributed into jurisdictions where it is unlawful to do so. For additional disclosures and information, please contact a BitOoda representative at info@bitooda.io.
Analyst Certification
Vivek Raman, denoted by an “AC” on the cover of this report hereby certifies that all of the views expressed in this report accurately reflect his personal views, which have not been influenced by considerations of the firm’s business or client relationships.
Conflicts of Interest
This research contains the views, opinions, and recommendations of BitOoda. This report is intended for research and educational purposes only. We are not compensated in any way based upon any specific view or recommendation.
General Disclosures
Any information (“Information”) provided by BitOoda Holdings, Inc., BitOoda Digital, LLC, BitOoda Technologies, LLC or Ooda Commodities, LLC and its affiliated or related companies (collectively, “BitOoda”), either in this publication or document, in any other communication, or on or throughhttp://www.bitooda.io/, including any information regarding proposed transactions or trading strategies, is for informational purposes only and is provided without charge. BitOoda is not and does not act as a fiduciary or adviser, or in any similar capacity, in providing the Information, and the Information may not be relied upon as investment, financial, legal, tax, regulatory, or any other type of advice. The Information is being distributed as part of BitOoda’s sales and marketing efforts as an introducing broker and is incidental to its business as such.BitOoda seeks to earn execution fees when its clients execute transactions using its brokerage services. BitOoda makes no representations or warranties (express or implied) regarding, nor shall it have any responsibility or liability for the accuracy, adequacy, timeliness or completeness of, the Information, and no representation is made or is to be implied that the Information will remain unchanged. BitOoda undertakes no duty to amend, correct, update, or otherwise supplement the Information.
The Information has not been prepared or tailored to address, and may not be suitable or appropriate for the particular financial needs, circumstances or requirements of any person, and it should not be the basis for making any investment or transaction decision. The Information is not a recommendation to engage in any transaction. The digital asset industry is subject to a range of inherent risks, including but not limited to: price volatility, limited liquidity, limited and incomplete information regarding certain instruments, products, or digital assets, and a still emerging and evolving regulatory environment. The past performance of any instruments, products or digital assets addressed in the Information is not a guide to future performance, nor is it a reliable indicator of future results or performance.
Ooda Commodities, LLC is a member of NFA and is subject to NFA’s regulatory oversight and examinations. However, you should be aware that NFA does not have regulatory oversight authority over underlying or spot virtual currency products or transactions or virtual currency exchanges, custodians or markets.
BitOoda Technologies, LLC is a member of FINRA.
“BitOoda”, “BitOoda Difficulty”, “BitOoda Hash”, “BitOoda Compute”, and the BitOoda logo are trademarks of BitOoda Holdings, Inc.
Copyright 2023 BitOoda Holdings, Inc. All rights reserved. No part of this material may be reprinted, redistributed, or sold without prior written consent of BitOoda.
The spotlight during the past week has continued to shine on Bitcoin – and with good reason. There were ongoing positive developments surrounding the flurry of new spot BTC ETF filings in June, which resulted in a number of major institutions (Blackrock, Fidelity, etc.) updating and resubmitting their filings to include custodians and BTC spot price surveillance mechanisms. As a result, enthusiasm continues to build towards a spot BTC ETF approval, and BTC continues to lead the charge in the crypto markets. This is evidenced by the ETH/BTC ratio, which has flatlined at the 0.60 level – this is the lowest level for the ETH/BTC ratio since July 2022.
Nevertheless, although “alt-coins” are under pressure relative to BTC (especially since several prominent alt-coins were alleged to be securities in recent SEC enforcement actions), Ethereum has arguably graduated from being an alt-coin to an institutional grade asset. ETH’s status as a commodity vs a security is hotly debated, whereas there is a more consensus view that many other tokens are true securities. Additionally, ETH beginning as Proof of Work before switching to Proof of Stake during the Merge provides an argument that ETH is potentially “sufficiently decentralized” and differentiated from other tokens.
Therefore, although the BTC ETF is likely to drive the crypto narrative in the near and medium term, ETH could emerge as the next institutional grade asset shortly thereafter. Part of the adoption thesis is driven by ETH being a differentiated asset to BTC: while BTC is “digital gold,” ETH represents a software platform akin to the ”App Store” with a token that has native staking yield. Other than Proof of Stake consuming less power / energy than Proof of Work and offering more potential blockchain security than mining, Proof of Stake has also introduced a staking yield that could be a foundational reason for institutional participation in ETH. In this piece, we give an overview of the ETH staking economics and landscape.
ETH’s staking yield is based on the “Ethereum economy” – or more specifically, from the activity of users and apps that use the Ethereum network. This is highly analogous to how US interest rates are based on activity in the US economy; in times of high growth + high inflation, US rates are raised (as we are seeing now), and in periods of low growth + recession, US rates are lowered (as we see during crises like 2008 and 2020). Ethereum’s staking yield programmatically achieves a similar result without the use of middlemen.
Ethereum, like Bitcoin, has protocol issuance of tokens which is paid out to participants that secure the blockchain by verifying transactions. For BTC, these are the miners, who are paid the BTC block subsidy (which is essentially a “yield” on the equipment/power investment a miner makes). For ETH after the Merge, these are the validators who stake their ETH and receive an ETH block subsidy for doing so. Issuance is a key part of the ETH staking yield.
Ethereum, like Bitcoin, also pays transaction fees to validators/miners. This comprises the other major part of the ETH staking yield. The difference is – Bitcoin is mainly used as a store of value rather than a means of payment, and BTC fees are therefore relatively small compared to the block subsidy. BTC will likely need to be subsidized by issuance for the foreseeable future unless an economy of users and apps develops on Bitcoin. Ethereum has the potential to have its network security “subsidized” entirely by transaction fees due to the blossoming economy of DeFi, NFTs, payments, gaming, L2s, and other smart contracts being built in the ecosystem.
Finally, we will examine different ways to participate in ETH staking, whether through solo staking or using pools.
Purpose
This research is only for the clients of BitOoda. This research is not intended to constitute an offer, solicitation, or invitation for any securities and may not be distributed into jurisdictions where it is unlawful to do so. For additional disclosures and information, please contact a BitOoda representative at info@bitooda.io.
Analyst Certification
Vivek Raman, denoted by an “AC” on the cover of this report hereby certifies that all of the views expressed in this report accurately reflect his personal views, which have not been influenced by considerations of the firm’s business or client relationships.
Conflicts of Interest
This research contains the views, opinions, and recommendations of BitOoda. This report is intended for research and educational purposes only. We are not compensated in any way based upon any specific view or recommendation.
General Disclosures
Any information (“Information”) provided by BitOoda Holdings, Inc., BitOoda Digital, LLC, BitOoda Technologies, LLC or Ooda Commodities, LLC and its affiliated or related companies (collectively, “BitOoda”), either in this publication or document, in any other communication, or on or throughhttp://www.bitooda.io/, including any information regarding proposed transactions or trading strategies, is for informational purposes only and is provided without charge. BitOoda is not and does not act as a fiduciary or adviser, or in any similar capacity, in providing the Information, and the Information may not be relied upon as investment, financial, legal, tax, regulatory, or any other type of advice. The Information is being distributed as part of BitOoda’s sales and marketing efforts as an introducing broker and is incidental to its business as such.BitOoda seeks to earn execution fees when its clients execute transactions using its brokerage services. BitOoda makes no representations or warranties (express or implied) regarding, nor shall it have any responsibility or liability for the accuracy, adequacy, timeliness or completeness of, the Information, and no representation is made or is to be implied that the Information will remain unchanged. BitOoda undertakes no duty to amend, correct, update, or otherwise supplement the Information.
The Information has not been prepared or tailored to address, and may not be suitable or appropriate for the particular financial needs, circumstances or requirements of any person, and it should not be the basis for making any investment or transaction decision. The Information is not a recommendation to engage in any transaction. The digital asset industry is subject to a range of inherent risks, including but not limited to: price volatility, limited liquidity, limited and incomplete information regarding certain instruments, products, or digital assets, and a still emerging and evolving regulatory environment. The past performance of any instruments, products or digital assets addressed in the Information is not a guide to future performance, nor is it a reliable indicator of future results or performance.
Ooda Commodities, LLC is a member of NFA and is subject to NFA’s regulatory oversight and examinations. However, you should be aware that NFA does not have regulatory oversight authority over underlying or spot virtual currency products or transactions or virtual currency exchanges, custodians or markets.
BitOoda Technologies, LLC is a member of FINRA.
“BitOoda”, “BitOoda Difficulty”, “BitOoda Hash”, “BitOoda Compute”, and the BitOoda logo are trademarks of BitOoda Holdings, Inc.
Copyright 2023 BitOoda Holdings, Inc. All rights reserved. No part of this material may be reprinted, redistributed, or sold without prior written consent of BitOoda.