The Merge on September 15 has been rather a damp squid, though not much was expected either. Staking is now the official way to run validator nodes and earn rewards. How much rewards can stakers expect to earn? What determines how much yield to expect? The following answers these and other questions.
Some major Ethereum staking highlights
Amount of Ether staked: 14 million ETH (approx. $2 billion)
Percentage of Ether staked: 12% of all ETH
Average expected yield (APR): 5-6%
Minimum ETH required to run an independent node: 32 ETH
In POS staking mechanism, the staked Ether can’t be withdrawn currently, as the withdrawal facility will be introduced with the Shanghai fork that is expected to happen next year.
Thus the current staking yield on Ethereum is comparable to a US treasury bond. Before the Merge, the yield stood around 4.5% APR as per a Coinbase analysis.
The yield in POS staking is distributed among all the accounts that are participating in the staking network. It combines rewards and transaction fees minus any penalties. The transaction fees proportion in the yield is reported to be around 1.3 percentage points (pp). The daily transaction fees have averaged around 500 ETH in the past few months.
The rewards are distributed based on the number of validators. More validators added to the network increase the overall gross reward, but decrease the reward per validator. Similarly, the greater the staked amount, the less is the yield. The burning rate of Ether is another factor that influences yield.
As for new Ether being issued each day, the figure as dropped significantly since the Merge, from 13,000 new coins to just around 1,600 new Ether minted each day by the protocol. New Ether is minted and passed into the accounts of good validators after each epoch lasting around six and a half minutes. The overall supply is yet to show the deflationary impact.
An important point to note as far as price of Ether and staking rewards are concerned is that miners were selling their earned Ether before the Merge, creating a selling pressure. This will now reduce and thus support the price. After the Merge, the price of Ether declined by around 20% within a couple of weeks, but this was more due to the overall market factors such as rise in interest rates in the US and the weakness in UK economy.
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