In September 2022, Ethereum successfully transitioned from its Proof of Work consensus mechanism to Proof of Stake. Dubbed ‘The Merge,’ Ethereum’s transition to Proof of Stake laid the foundation for more robust security, better scalability, and a plethora of new Ethereum staking options for investors to take advantage of.
Proof of Work, popularized by Bitcoin, is a consensus mechanism that uses hash power from cryptocurrency miners to secure transactions on the blockchain. This process requires large amounts of energy and specialized computer hardware to mine cryptocurrency.
Conversely, Proof of Stake uses locked capital to incentivize proper behavior to secure blockchains. Instead of consuming energy and computer hardware to earn cryptocurrency, Proof of Stake uses staked funds as collateral to incentivize stakers to work in the best interest of the network.
Ethereum staking works by locking funds on Ethereum’s beacon chain in exchange for staking rewards. Rewards are generated from transaction fees and token emissions, typically ranging from 3% to 5%.
Direct Ethereum staking requires significant capital (32 ETH), as well as technical knowledge and hardware requirements. By staking ETH directly, you aid in Ethereum’s decentralization and potentially earn higher rewards than from liquid staking.
Such a high barrier to entry makes it difficult for most individuals to participate in ETH staking directly. Fortunately, liquid staking services have emerged as a far more accessible alternative for ordinary users.
Liquid staking protocols use novel innovations to drastically reduce the barriers to ETH staking. With this approach, users can stake any amount of ETH to begin earning staking rewards.
The process is far less intimidating than its name suggests:
Issuing LSTs allows users to earn from ETH staking without needing to sacrifice control of their capital. Users can participate without needing to lock up capital for a predetermined amount of time. Further, those who put their LSTs to work via other DeFi protocols are able to compound their returns.
The inclusive nature of liquid staking tokens has seen the sector grow rapidly in DeFi. It’s now the largest sector of DeFi by total value locked, with over $44 billion in assets deposited to liquid staking protocols.
Ethereum staking rewards vary between protocols. However, users can generally expect to earn yields in the region of 3 - 5%.
As of May 2024, Lido’s stETH offers yields of 2.9%. Rocket Pool’s rETH currently delivers 2.8% APY. Meanwhile, Frax Finance’s sfrxETH offers 3.1% APY.
In comparison, running your own validator node generates around 3.7% APY. While this figure is substantially higher, it’s important to remember that running a node requires a 32 ETH investment. If you’re looking to earn higher staking rewards without maintaining your own validator, you may opt for a liquid staking aggregator, such as OETH.
Origin Ether (OETH) is the flagship ETH liquid staking token offered by Origin Protocol. OETH harnesses Beacon Chain staking, enhancing yield through SSV incentives and audited DeFi strategies.
Even in the face of compressing staking yield, the protocol still delivers 4% trailing 30-day APY. This means that stakers enjoy around 30% higher yield than what’s currently offered by Lido’s stETH.
OETH is fully backed by reserves of ETH, which can be tracked on the Origin Ether analytics page. Users can deposit any amount of ETH in order to mint an equivalent value of OETH, which follows the price of ETH.
Traders can use OETH like any other token, ensuring that users retain full control of their capital. OETH’s unique design also offers an impressively seamless user experience. The protocol directly disburses yield to holders’ wallets, with no manual compounding required. As a result, users enjoy time savings and avoid excessive transaction fees.
OETH is able to offer outsized APYs thanks to its meticulous strategies.
One of OETH’s primary strategies utilizes reserves to provide liquidity to pools on Curve, the largest decentralized exchange in DeFi. Supplied liquidity generates yield in the form of trading fees.
As this is executed via Convex Finance, these reserves also earn rewards tokens in the form of CVX.
By staking OGN, users receive voting and economic power in the form of xOGN. This allows holders to propose changes and vote weekly on fund allocations. At the same time, users enjoy double-digit APYs on their staked OGN.
As with any investment, staking Ethereum carries risks. It’s important to do extensive research before deciding to pursue staking.
Direct Ethereum staking is best suited for users with resources and high technical proficiency. Thankfully, liquid staking makes this process far more painless.
With services like OETH, users can retain control of their investment without sacrificing yield. In the case of OETH, this yield outpaces pure staking and other LST protocols.
The amount of ETH staked to the network has steadily grown despite broader uncertainty, evidencing the sector’s strength. In recent months, the share of ETH supply staked to the network has risen from 20% to over 25%. To put this in perspective, most proof-of-stake chains see upwards of 40% of their tokens staked.
As ETH is now deflationary, the race to accumulate has never been more urgent. Dive into the Origin Ether ecosystem and learn how you can stack ETH faster: app.oeth.com
