A study from Nansen reveals that 5 organizations possess 64% of staked Ether (ETH) ahead of Ethereum’s Merge with the Beacon Chain.
Also, Nansen determined that more than 70% of staked ETH is worth less than when bought. They published a research addressing one of the main anxieties highlighted by Ethereum’s Merge: that a large number of “stakers” may sell out ether (ETH) if given the opportunity.
Five entities hold over 64% of all ether, according to Nansen. 30% of staked ETH is on Coinbase (COIN), Kraken, and Binance. Lido, a decentralized financial network, has 31% of staked ETH.
This concentration raises worries about Ethereum’s “credible neutrality” and censorship of base-layer transactions. Not only theoretically: Following the U.S. Treasury Department‘s prohibition on Tornado Cash, Ethereum validators must decide whether to blacklist Tornado Cash wallets.
Lido and other decentralized on-chain liquid staking protocols were created as a counter-risk to centralized exchanges acquiring the most staked ETH. These enterprises must follow territorial restrictions.
The top 9 addresses (excluding Treasury) possess 46% of governance authority, and a few addresses dominate proposals. Proper decentralization is risky for a company with a majority-staked ETH.
Nansen’s research says Lido must be decentralized to defy censorship. Onchain data demonstrates that Lido’s governance token (LDO) is concentrated, with big token holders facing censorship risk. Nansen admits that the LIDO community is actively researching alternatives to over-centralization, including dual governance and a legally and geographically dispersed validator set.
Given the current cryptocurrency market downturn, most staked ETH is in the red by 71%. In-profit illiquid stakers own 18% of all staked ETH.
Nansen says these stakers are most likely to sell ETH after the Shanghai upgrade. ETH withdrawals won’t be available until 6 to 12 months after The Merge, therefore sell-off fears are unfounded.
Even then, not everyone may withdraw their stake at once because of an exit backlog of roughly six validators (typically 32 ETH apiece) each epoch (6.4 min). Removing all validators would take 300 days with 13 million ETH invested.
The blockchain and analytics platform launched a research and education arm accompanying its Merge report to combine on-chain data analytics with masterclasses and research papers
Since the Beacon Chain’s introduction in December 2020, people have been able to stake ETH and collect incentives. 11% of ether’s supply, $20 billion, has been staked.
Nansen says 70% of all staked ETH is worth less than when it was bought. ETH investors in the hole are less inclined to sell their holdings, say the researchers. Only 18% of illiquid stakers (those who employed third parties) are “profitable.”
ETH stakers must wait for the Shanghai update to access their bags. The Ethereum Foundation recommended a “withdrawal queue” to avoid mass selling. Nansen calculated that if all ETH holders wanted to sell, the line would last 300 days.
It is quite doubtful that there would be a significant sale of staked ETH; nevertheless, people who purchased ETH in order to trade on the Merge may choose to liquidate their holdings. Buy the rumors and sell the facts.
Cover image: Ethereum blockchain – Universal Public Domain.
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