Ethereum Staking Landscape Thrives in 2024: A Year-End Review

• In 2023, Ethereum experienced significant growth and stability, contrasting with the turbulence of 2022.
• Ethereum’s network, despite price fluctuations, led in DeFi and liquid staking innovation.
• A total of 28.7 million ETH, or nearly 24% of the circulating supply, was staked in 2023, nearly half of which occurred in that year.

As 2023 draws to a close, Ethereum’s blockchain ecosystem emerges stronger, marked by growth, innovation, and resilience. The report by Origin Protocol delves into the world of Ethereum staking and highlights the remarkable developments that have shaped its landscape as we look ahead to 2024.

In contrast to the turbulence witnessed in 2022, Ethereum experienced significant growth and stability throughout 2023. Factors like a positive macroeconomic climate, renewed interest from institutional investors, and the emergence of new blockchain features have set the stage for a promising year in 2024.

Ethereum Staking Dominance

Despite the fluctuations in Ethereum’s price, the network continues to lead the decentralized finance (DeFi) sector in innovation. While many other networks focused on new scaling technologies and modularity, Ethereum’s staking landscape quietly evolved at a rapid pace.

A staggering 28.7 million ETH, nearly 24% of the circulating supply, is now staked within the network. Notably, almost half of this total ETH was staked over the course of 2023.

The catalysts for this surge in demand for Ethereum staking were substantial network upgrades and the rise of liquid staking finance (LSTfi), making it a standout sector in the cryptocurrency space.

Shapella Upgrade

In 2022, Ethereum transitioned from a proof-of-work (PoW) to a proof-of-stake (PoS) consensus mechanism with the Merge. In 2023, Ethereum further strengthened its PoS architecture with the Shanghai and Capella upgrades, collectively referred to as Shapella. These upgrades introduced the ability to unstake, allowing ETH stakers to withdraw their assets for the first time.

Ethereum staking continued to innovate with the introduction of new primitives. Restaking, pioneered by EigenLayer, enables projects on other networks to benefit from Ethereum’s robust network security, promoting resilience in new projects. Users can supply staked ETH or LSTs for restaking, earning rewards and EigenLayer points in return.

Yield tokenization within DeFi gained momentum in 2023, enabling leveraged bets on protocol yield performance. Pendle Finance led the way by tokenizing yield, allowing users to amplify their returns by participating in leading LSTs and established yield platforms.

Challenges Ahead

While Ethereum’s staking adoption has grown, the issue of yield compression has come into focus. As more ETH is staked, rewards per staker decrease due to a fixed pool of rewards distributed among more users. As Ethereum staking adoption is poised to increase further, this trend is likely to continue, reducing overall rewards for stakers.

The ETH staking landscape remains a beacon of strength, innovation, and resilience. The developments of 2023 set the stage for a year filled with promise, as Ethereum continues to lead the way in the world of decentralized finance.