- The transition from Proof of Work to Proof of Stake comes along with regular decentralized finance users benefiting from rewards that only miners were previously enjoying.
- The PoS consensus model has been criticized on the ground of the centralization of the staked ETH.
The post-merge ETH is said to have become obsolete following the emergence and rising interest in Lido-staked Ethereum (stETH) and other liquid staking derivatives. In addition to liquid staking derivatives offering all the benefits of ETH, they also function as yield-generating assets. The transition from Proof of Work to Proof of Stake comes along with regular decentralized finance users benefiting from rewards that only miners were previously enjoying. The task is simply to hold stETH or any other ETH liquid-staking derivative. It is worth noting that stETHhas received attention in the past months with Coinbase and Frax releasing ETH liquid staking derivatives.
Sam Forman, the founder of Sturdy, a Defi lending protocol believes that users reason from the perspective that the only benefit of holding regular ETH comes when there is a price surge. However, holding liquid staking derivatives would increase their profit through staking yielding. According to him, project founders have resorted to a similar strategy.
From Defi to nonfungible token (NFT) projects, teams across Web3 have integrated stETH into their protocols, with behemoths such as Curve and Aave making it even easier for Defi users to integrate stETH into their investment strategies.
The days of regular Ethereum appear to be numbered
It is also important to note that the ETH liquid staking derivatives help maintain the Ethereum network. The PoS consensus model has been criticized on the ground of the centralization of the staked ETH. Lido for instance contributes about 80 percent of the market share and controls more than 30 percent of the staked ETH.
Forman believes that the proliferation of alternatives comes with a solution considering that market shares act as the spread between various organizations. He also mentioned that the proliferation of liquid staking derivatives helps increase the amount of ETH put in the validator systems. This ensures that network securities are enhanced while providing yield.
Forman stated in his article that the days of Ethereum appear to be numbered. ETH not converted to liquid staking derivative will just be money without real use. He also stated that liquid staking derivatives are likely to form the central part of the simplest Defi strategy. The benefit has made way for individuals and institutions within the centralized finance (CeFi) and Defi industry to develop interest for stETH.
Coinbase providing “cbETH” means even retail investors will be familiar with the strategy. We’re likely to see a steep upshoot in protocols accepting liquid staking derivatives as users begin to flock to the essentially free yield. Soon, many Defi users may only hold ETH to cover their gas fees.