staking has now reached 6.73 million ETH (worth about $21.2 billion), surpassing the total amount of “wrapped ETH” on the network, according to data from blockchain analytics firm Nansen.
The rising volume of staked ETH signals confidence among users in developers’ ability to deliver on the much-anticipated ETH 2.0 network update, when the current proof-of-work blockchain of ETH “merges” with the chain.
Unlike most other cryptocurrency staking, staked ETH remains locked up until that milestone, which doesn’t yet have a fixed date; the merge is expected to happen sometime early in 2022. That stands in contrast to wrapped ETH (there’s currently 6.69 million on the ETH network), which are 1:1 tokenized versions of regular ETH coins that can be put to use straight away. They are wrapped, or tokenized, so they can be better compatible for use on decentralized finance (DeFi), non-custodial financial services that allow for peer-to-peer lending, borrowing, and trading via a blockchain.
Check who's #1 ETH holder now guys! pic.twitter.com/3isDLkrv7I
— Alex Svanevik (@ASvanevik) August 16, 2021
ETH, like , currently works on a blockchain mechanism called proof of work, which relies on gas-guzzling miners—powerful computers—to validate transactions. Miners solve complex equations to win the privilege of validating transactions and being rewarded with newly-minted coins.
Mining is a lucrative business for deep-pocketed investors and companies who can afford high-tech hardware and industrial sites, but it is less accessible to ordinary users.
Staking, an alternative to mining, may change that. It refers to pledging cryptocurrency to a blockchain network and participating in the task of verifying transactions. For putting economic resources on the table to secure the proof-of-stake network, stakers get newly-minted coins as a reward, just like miners.
There’s normally a minimum requirement of 32 ETH (roughly $102,000 at today’s prices) to become a validator and run an ETH 2.0 node. But through staking-as-a-service companies and centralized exchanges, would-be stakers are able to pool together holdings to meet that threshold, participate in securing the new network, and earn rewards.
The source of about half of ETH staked isn’t known, as per Nansen data. The known largest amount of staked ETH (820,544) is deposited on Kraken, a cryptocurrency exchange. That’s followed by staking-as-a-service company Lido Finance with 762,272 ETH and global exchange Binance with 588,608 ETH.