Proof-of-Stake Assets Reach All-Time High Staking Rates in Q3 2023
In the third quarter of 2023, proof-of-stake (PoS) assets have gained significant attention with a surge in staking rates among the top 35 stakable assets. According to Staked at Kraken’s “State of Staking” report, the average stake rate for these assets has reached an all-time high of 52.4% in Q3, up from 49.3% in the previous quarter.
Staking involves actively participating in a proof-of-stake blockchain by locking up coins as collateral. This process helps secure the network and makes it harder for malicious actors to attack. The most staked networks last quarter include Aptos and SUI, with 84.1% and 80.5% of the supply staked respectively, followed by Mina, Solana, and Cosmos.
Tim Ogilvie, Product Director and Head of Staked at Kraken, explains that stake rates tend to increase when holders become more familiar with the underlying protocol and are willing to support the network using their tokens. However, an increase in stake rate can lead to a reduction in average returns as rewards need to be shared among more validators.
Staking Yields Decline
Despite the increase in stake rates, the average staking yield dropped by 0.4% to 10.2% compared to the previous quarter. This downward trend has been ongoing since March 2022 when the average yield peaked at 15.4%. Only two chains among the top 10 assets offer yields higher than 7.5%—Polkadot (15.1%) and Cosmos (18.9%).
Ethereum dominates staking in PoS networks with a 79% share. However, due to high staking rates and transaction activity shifting to layer-2 networks, Ethereum’s staking yield in Q3 reached a record low of 4.5%. At the same time, Ethereum’s staking rate reached an all-time high of 22%.
Increase in Staked Assets Value, but Decline in Rewards
The total value of staked assets saw a 3% increase in Q3 compared to the previous quarter and a 17% increase year-over-year, reaching $73.5 billion. However, the decline in annualized rewards resulted in stakers receiving $4.1 billion, a 7% decrease from the last quarter and an 18% decrease year-over-year.
Hot Take: Growing Interest in Staking Drives High Rates but Low Yields
The third quarter of 2023 witnessed a surge in staking rates among proof-of-stake assets. This increase can be attributed to growing familiarity with protocols and willingness to support networks using tokens. While high stake rates contribute to network security, they also lead to a reduction in average returns for validators.
Despite the rise in stake rates, staking yields have continued to decline. Only two chains among the top 10 assets offer yields higher than 7.5%. Ethereum dominates PoS networks but experienced its lowest staking yield on record due to high stake rates and transaction activity shifting to layer-2 networks.
The increase in staked assets’ value is overshadowed by the decline in annualized rewards for stakers. Although interest in staking is growing, it is important to consider the impact on yields as stake rates continue to rise.
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