The amount of $ETH staked on DeFi protocols is over 13.2 million $ETH staked, which is an all time high, as investors anticipate upside from the upcoming merge.
According to crypto researcher, Delphi Digital, this amount has almost doubled over the past year despite the price of $ETH declining by 43% over the same period.
The chart began to track staking since November 2020 when Ethereum introduced its Proof-of-Stake chain. We can see that the amount of $ETH staked by delegates has been growing steadily, starting from 1 million $ETH staked between November and December 2020.
Proof-of-Stake (PoS) is a consensus mechanism that is integral to ETH becoming cheaper and faster to use, much better than the original Proof-of-Work (PoW) that involves mining. Since November 2020, when Ethereum introduced a PoS layer to accompany the original layer, it began its journey towards ETH 2.0 whereby it would merge the PoS chain to the execution layer.
The full merge is expected in September 2022 after the PoS chain merged to the last test environment, Goerli, in August August 2022, with the full merge now awaiting.
Stakers stand to gain from the switch as all transactions on the blockchain will need to be validated by users who have staked $ETH locking them in pools for an extended period.
For blockchains like Ethereum which are, in essence, distributed databases, the network’s nodes must reach an agreement on the network’s current state. Consensus mechanisms like Proof of Work (PoW) and Proof of Stake (PoS) help the networks to reach agreements.
PoS is done by validators who have staked $ETH to participate in the system. A validator is chosen at random to create new blocks, share them with the network, and earn rewards.
According to Ethereum, a minimum of 32 $ETH is required to be staked for someone to qualify as a validator.
As the date for the upcoming merger approaches, the number of ETH tokens staked on the ETH 2.0 staking contract is also increasing. Although the value of Ether has dropped significantly from its 2021 highs due to the market downturn, the number of staked tokens has continued to grow.