After the merger of Ethereum (ETH), it will be converted into a PoS mechanism, and all block rewards (miner fees) will be converted into rewards for pledgers. At present, 10% of ETH has entered the pledge lock, Jordi Alexander, Chief Information Officer of Selini Capital, warned. , he said that according to the data, the annualized yield of ETH pledge in 2023 will be only 3.2%. (Recap:Depth丨4 Rational analysis: Is the Ethereum merger exaggerated?) (background supplement:Why are there two paragraphs 9/6 and 9/13-15 in The Ethereum Merger? What is the impact? What should I pay attention to?)
The Merge of Ethereum is expected to be completed on Thursday (15th), and after the switch to PoS mechanism, the gas fee paid by the exchange on Ethereum will become the reward for ETH pledgers, which means that the more the amount of pledge , the distribution of the rewards will also decrease.
Jordi Alexander, chief information officer of Selini Capital, who had previously thought that the market had overreacted to the merger, poured cold water on those who expected “high annualized returns” from ETH staking. He predicted that the staking returns of Ethereum after the merger would be lower than expected. The annualized yield is only 3.2% in 2023.
The reason for the sharp drop in the annualized yield of ETH pledge
Jordi Alexander explained in his guest Bankless article that the income from staking ETH comes from:
Block Reward Gas Fee MEV (Miner Extraction Value) Reward
At present, about 10% of Ethereum’s liquidity has been locked into pledge. With the successful merger, Jordi Alexander believes that a large number of holders will join the pledge. Not only will the annualized reward decrease, but the annual inflation rate will also increase. . This is the main reason for the lower annualized earnings.
The income of the stakers also comes from the gas fee. The stronger the transaction volume on the Ethereum mainnet, the more the gas profit is paid to the validator, but Jordi Alexander pointed out that Ethereum has burned more than 50,000 ETH per month from the peak of gas burning to the recent few Less than 20,000 ETH per month, and may continue to spiral downward in the future.
30-60 million ETH will be pledged in 2023
Jordi Alexander predicts that when the pledge is unlocked in 2023, there will be 30-60 million ETH pledged in the library, and the block reward will be about 2.5%, plus 0.5% of the gas profit, 0.1-0.2% of the MEV, and finally only the validator will be allowed to Get an annualized rate of about 3.2%.
And 3.2% still needs to “deduct” about 1.5% of the token inflation rate, and 0.25-1% of the platform’s commission. If the user pledges through a third-party platform, the real profit ratio is extremely limited.
Jordi Alexander finally expects that Ethereum can continue to promote technological innovation, provide a good user experience, and achieve decentralization guarantees in the ultimate anti-censorship issue. Because in addition to Ethereum, other public chains will not stop and wait for Ethereum to take over the world.
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