Almost two-thirds of the ETH protecting the network ahead of the merging is accounted for by one DeFi staking pool and three centralized crypto exchanges.
Who Runs the Biggest Ethereum Staking Pools?
Ethereum staking pools have been a popular, albeit sometimes contentious, means for investors without finances or knowledge to participate in network validator payouts.
And there has been plenty of opportunities to participate. The merger has been in the works for years and is set to commence next week.
According to the Ethereum Foundation, the merger would convert Ethereum’s existing proof-of-work mining model—which takes a lot of electricity to run the mining rigs that process transactions—to a proof-of-stake consensus method that will consume over 99% less energy.
When the Ethereum mainnet makes that move, validators, not miners, will be in charge of verifying transactions and adding them to the blockchain. Validators, like miners, will be rewarded for their contributions to network security.
However, being a validator has a high barrier to entry and is fraught with danger. To become a validator, investors would need to pay 32 ETH collateral (about $52,000) and maintain hardware and software to avoid downtime fines.
This has resulted in staking pools.
To participate, participants deposit their Ethereum with a third party, such as Lido Finance or Coinbase. The money is used by these companies to set up validators and cover the overhead of running nodes. In exchange, they take a portion of the benefits and distribute the remainder to depositors.
As of September 2, here is a deeper look at the major Ethereum staking pools:
4.2 million ETH, Lido Finance
Lido Finance’s Staked ETH (stETH) has by far been the most popular staking pool. Lido introduced the liquid staking token in late 2020, just before the creation of the Beacon Chain. Because of the token’s liquidity, ETH depositors obtain stETH and can sell, trade, or lend out the stETH while their ETH is held by Lido.
2 million ETH on Coinbase
Since April of last year, Coinbase has offered Ethereum staking. However, the business introduced a liquid staking solution two weeks ago: Coinbase Wrapped Staked ETH (cbETH). It works in the same way as stETH and may be used as collateral in decentralized finance lending protocols. According to CoinMarketCap, cbETH has a market worth of $936 million as of Friday and is held in 880 different wallets.
1.1 million ETH, Kraken
Kraken said in December 2020, following the launch of the proof-of-stake Beacon Chain, that its clients have invested 100,000 ETH ahead of the merger. That sum has multiplied tenfold. Kraken, unlike Lido, Coinbase, and Binance, does not support liquid staking. In fact, a caution at the top of its frequently asked questions website informs customers that they would be unable to unstake their Ethereum until after the integration. However, Kraken’s exposure to staking pools is more than the 1.1 million ETH would suggest. Kraken purchased Staked in December 2021, and its US affiliate, Staked.US, accounts for 405,600 staked ETH.
Binance has 904,608 ETH.
Binance issued its Binance Beacon ETH (bETH) to Ethereum depositors who had joined its staking pool in late 2021. The bETH tokens support liquid staking, which means they may be used on Binance’s Ethereum sidechain., the Binance Smart Chain, in the same manner that they would normally use Ethereum. According to BscScan, it is now stored in 8,939 distinct wallets.