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Demand for Ethereum staking continues to grow following the network’s transition from a proof of work (PoW) consensus mechanism. The new proof of stake (PoS) design allows anyone to participate in securing the network by staking ETH to Ethereum validators. Validators coordinate to confirm new transaction blocks to the blockchain.
In exchange for their contributions, stakers receive ETH staking yield from network fees. Users can run their own validator nodes by staking 32 ETH via the smart contract, or they can earn rewards from swapping to liquid staking tokens (LSTs). Staking has seen renewed institutional interest in 2023 following Ethereum’s Shapella upgrade, which enabled withdrawals in April.
Given the complexity of staking and the resources required, staking services have emerged to make this process more seamless.
In line with increasing demand, a number of staking solutions have been developed to cater to the unique needs of institutional clients.
Custodial staking services offer easy access to ETH staking for institutions. These platforms manage users’ funds to generate yield from ETH staking.
While custodian services allow firms to take a hands-off approach, these platforms carry their own risks. Specifically, users have limited insight into how their funds are being allocated. It’s important to remember that Ethereum slashes nodes that break network rules. Should a centralized custodial service fail or mismanage digital assets, investors risk losing their deposited funds.
Coinbase is one of crypto’s most reputable entities, offering a wide range of custodial services. Institutions can stake ETH via Coinbase Cloud to harness the company’s infrastructure.
The company offers an estimated 3.02% rewards rate for users. However, Coinbase Cloud charges a 10% fee for staking to its public validators. Firms can also choose to run dedicated validators, which are subscription-based and carry varying fees.
As a publicly listed company, Coinbase has high standards for user protection. Despite this, the exchange does not offer any slashing coverage for ETH stakers.
Launched in 2017, Anchorage Digital offers a compliant platform for major institutions to stake ETH. Anchorage is crypto’s first federally chartered bank, offering users clear access to staking without legal red tape.
Users can stake batches of 32 ETH through Anchorage to earn rewards from transactions and new blocks. The company’s focus on managing institutional assets makes it an appealing choice for firms looking to harness ETH staking. However, firms should factor in management costs and other fees charged by Anchorage.
Since 2019, Fireblocks has served as a leading platform for institutions wishing to harness blockchain technologies. The company has enjoyed strong backing since its inception, achieving an $8b valuation in 2022.
Fireblocks offers a wide range of crypto services, including staking for ETH and other assets. The company’s platform offers “direct” custody to lower counterparty risk. Investors retain full control of their private keys, and need to sign off on all transactions.
This design allows users to take advantage of Fireblocks’ services with more control over their investments.
Institutions can also choose to stake their ETH via decentralized liquid staking platforms.
With liquid staking, institutions can deposit ETH to staking pools via dedicated protocols. In exchange, stakers receive a Liquid Staking Token (LST) representing their capital and accrued yield. LSTs maintain a peg to ETH and can be used freely across Ethereum's ecosystem.
As a result, institutions can earn staking rewards while retaining full control over their capital. This approach continues to record impressive demand. Liquid staking pioneer Lido Finance accounts for more than 30% of the 31+ million ETH staked ($100B+) at present.
However, liquid staking platforms face a key challenge: yield compression. As more entities stake ETH, the same pool of rewards is split between more stakers.
Origin Ether (OETH) has been built to address this issue head on. Users can mint OETH by depositing ETH to the platform. OETH functions as an enhanced LST, empowering stakers to control their capital while earning higher yield than pure liquid staking tokens.
OETH’s reserves are deployed to Ethereum's beacon chain to earn staking yield, which is further boosted by audited liquidity provision strategies on Curve and Convex. These rewards are distributed directly to stakers’ wallets, creating a seamless staking experience.
The platform is able to deliver this yield while still prioritizing robust security and usability. OETH’s open-source codebase has been rigorously audited by the likes of OpenZeppelin to ensure user safety.
These comprehensive mechanics make OETH a compelling staking option for institutions.
Institutions can also opt to stake ETH directly via the smart contract. In doing so, firms can earn increased rewards without relying on third parties.
However, this is a highly complex undertaking. Firms would need to set up and manage their own validator nodes, requiring substantial technical resources. Considering that the network slashes nodes that break rules or face downtime, expert maintenance is critical to successful staking.
Furthermore, self-staked ETH is locked in the smart contract. This means that access to capital is limited, as the withdrawal process can take substantial time to execute.
Origin Ether empowers institutional stakers to earn outsized ETH rewards without the red tape of solo-staking or the risks of custody. With OETH, institutional clients can stake seamlessly with the aid of a veteran team of innovators.
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