The Ethereum network's transition from Proof-of-Work (PoW) to Proof-of-Stake (PoS) marked a pivotal moment in blockchain history. This shift, commonly referred to as "the Merge," drastically reduced energy consumption by approximately 99.95% and cut annual ETH issuance by around 90%. In a PoS system, validators secure the network by locking up native tokens—ETH in this case. Despite the clear benefits, Ethereum’s current staking rate stands at just 12%, according to Staking Rewards data as of September 26. This is notably lower than other major PoS blockchains like BNB Chain, Cardano, and Solana, where staking rates exceed 70%.
With significant room for growth in ETH staking adoption, third-party staking service providers—often labeled as “Staking as a Service” (SaaS)—are emerging as key players in expanding participation. Self-staking requires technical expertise and hardware investment, creating a barrier for many users. As a result, liquid staking platforms and centralized exchanges have become popular alternatives.
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Current State of Ethereum Staking
As of September 25, approximately 13.96 million ETH were staked across 436,247 validators. While this represents substantial value, the 12% staking ratio indicates that the majority of ETH holders remain uninvolved in network validation.
Notably, the Merge did not trigger a surge in new staking activity. During the week of September 15—when the transition officially occurred—only 155,206 ETH were newly staked, marking a modest increase of about 1.13%. Although recent weeks have seen slightly higher inflows compared to mid-year levels, the growth remains below historical peaks observed in late 2020, mid-2021, and early 2022.
This suggests that while the Merge was a technological milestone, it hasn't yet catalyzed mass user adoption of staking.
Distribution of Staked ETH
Most ETH staking is conducted through third-party services:
- Liquid staking protocols: 33.2%
- Centralized exchanges (CEXs): 30.9%
- Staking pools: 9.3%
Together, these channels account for 73.4% of all staked ETH. The remainder consists of large holders ("whales") at 22.2%—including notable figures like Vitalik Buterin, who has staked around 6,976 ETH—and other minor participants at 4.4%.
Interestingly, the share of liquid staking has slightly declined from 48.7% on May 9 to 46.2% by September 19, while whale participation rose from 24.4% to 26.6%. This shift reflects growing caution among retail investors toward dominant protocols like Lido, whose growth has slowed.
Why Has Lido’s Growth Slowed?
Lido’s dominance in liquid staking faced challenges earlier in the year when market volatility led to a widening negative premium between stETH (Lido’s derivative token) and ETH. On May 13, the discount exceeded 10%, making direct ETH purchases more attractive than staking via Lido. A similar event occurred on June 13 due to liquidations involving stETH-backed loans.
However, confidence gradually returned as the Merge approached. By mid-September, the stETH/ETH spread had narrowed to under 1%, with the negative premium dropping to just 0.48%—the lowest among major liquid staking derivatives.
Prior to the Merge on September 15, stETH traded at a ~3% discount; post-Merge, it stabilized within a sub-1% range, signaling renewed market trust.
Centralization and Regulatory Risks
Despite their convenience, dominant staking platforms pose centralization risks. The top three entities—Lido (30.1%), Coinbase (14.6%), and Kraken (8.3%)—control over 53% of all staked ETH combined. Such concentration threatens Ethereum’s decentralization and could potentially enable coordinated attacks or censorship.
Regulatory scrutiny has also intensified. The U.S. Securities and Exchange Commission (SEC) argued in a legal filing that because a majority of Ethereum nodes are located in the United States, all Ethereum transactions may fall under U.S. jurisdiction. This raises concerns about global compliance and potential regulatory overreach.
Additionally, former SEC chair Gary Gensler has suggested that intermediaries facilitating crypto staking might need to undergo the Howey Test to determine whether their services constitute securities offerings. If classified as such, PoS networks like Ethereum could face stricter federal regulations.
Comparison of Major ETH Staking Platforms
To evaluate current options, we compare the two largest liquid staking platforms and three leading centralized exchanges based on data from September 19 (staking volume) and September 23 (price metrics).
All five platforms issue liquid staking derivatives:
- Lido: stETH
- Coinbase: cbETH
- Kraken: ETH2.S
- Binance: BETH
- Rocket Pool: rETH
Performance fees across these platforms range between 10%–15%, which is considered fair and competitive. Binance does not publicly disclose its fee structure but currently offers an APR matching Lido’s at 5.2%.
Derivative Token Pricing and Negative Premiums
Due to the inability to withdraw staked ETH until the upcoming Shanghai upgrade, all derivative tokens trade at a discount to ETH:
| Platform | Derivative | Negative Premium |
|---|---|---|
| Lido | stETH | 0.48% |
| Kraken | ETH2.S | ~1.5% |
| Binance | BETH | ~2.0% |
| Coinbase | cbETH | 3.45% |
| Rocket Pool | rETH | N/A (premium) |
Rocket Pool’s rETH is priced slightly above ETH because it already incorporates accrued rewards into its exchange rate.
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Utility and Flexibility of Staking Derivatives
One of the most critical differentiators among platforms is derivative usability:
- Liquid staking tokens like stETH and rETH are widely accepted across DeFi ecosystems. They can be used in lending protocols (Aave, MakerDAO), decentralized exchanges (Uniswap), yield aggregators, and more.
Centralized exchange derivatives, however, are often restricted:
- cbETH can only earn yield within Coinbase’s ecosystem.
- BETH only accrues rewards when held in Binance’s spot wallet; moving it to BNB Smart Chain for yield farming halts earnings.
This limitation reduces capital efficiency and discourages advanced DeFi strategies.
FAQ: Common Questions About ETH Staking
Q: When will I be able to unstake my ETH?
A: The ability to withdraw staked ETH is expected after the Shanghai upgrade, anticipated in early 2025. This will allow full liquidity for previously locked assets.
Q: What is negative premium in liquid staking?
A: It refers to the discount at which staking derivatives (like stETH) trade relative to native ETH. Since withdrawals aren’t yet enabled, market uncertainty causes this gap.
Q: Is liquid staking safer than using centralized exchanges?
A: While both carry risks, liquid staking protocols are generally non-custodial and integrated into open DeFi systems, offering greater transparency and composability than CEX-based solutions.
Q: Why does Lido have a lower negative premium?
A: High liquidity, broad DeFi integration, and strong community trust contribute to stETH’s tighter price alignment with ETH.
Q: Are there risks associated with high staking centralization?
A: Yes. If a small number of entities control a majority of validators, they could theoretically collude to disrupt finality or censor transactions—undermining Ethereum’s security model.
Q: Can I lose money by staking ETH now?
A: While staking rewards are positive, impermanent loss, smart contract bugs, or slashing penalties (for validator misbehavior) pose potential risks—especially in volatile markets.
Final Thoughts
Ethereum’s shift to PoS opens vast opportunities for passive income and network participation. However, choosing the right staking method matters—not just for returns but for security, decentralization, and future flexibility.
Liquid staking platforms like Lido lead in adoption due to their low negative premiums and extensive DeFi compatibility. In contrast, centralized exchange offerings often sacrifice utility for simplicity.
As the ecosystem evolves toward full withdrawal capabilities, users should prioritize solutions that offer transparency, composability, and alignment with Ethereum’s long-term vision of decentralization.
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