We do the research, you get the alpha!
Proof-of-stake (PoS) assets have again taken center stage in the third quarter of 2023, which saw a dramatic surge in staking rates across the top 35 stakable assets.
According to the latest “State of Staking” report by Staked at Kraken, the average stake rate—the percentage of tokens from the circulating supply that are being staked in a particular cryptocurrency network—for these assets has hit an all-time high in Q3 2023, spiking to 52.4% from 49.3% in the previous quarter.
Staking refers to the process of actively participating in the operation of a proof-of-stake blockchain, where validators are chosen to create new blocks and confirm transactions based on the number of coins they "stake" or lock up as collateral.
Staking also helps secure the network by discouraging malicious behavior, meaning the higher the stake rate, the more difficult it is for bad actors to attack the network.
The most staked networks last quarter include Aptos and SUI with 84.1% and 80.5% of the supply staked respectively, followed by Mina (77.6%), Solana (71.9%), and Cosmos (67.6%), per the report.
“Stake rates tend to increase when holders become more familiar with the underlying protocol, and more willing to use their tokens to support the network,” Tim Ogilvie, Product Director and Head of Staked at Kraken, told Decrypt. “If network activity is more or less the same then an increase in stake rate can lead to a reduction in the average return. This is because staking rewards need to be shared out between more validators.”
Staking yields continue to slip
The latest increase in the average stake rate, however, resulted in the average staking yield dropping by 0.4% from the previous quarter to 10.2%.
As the report notes, this continues the downtrend lasting from March 2022, when the average yield peaked at 15.4%. Notably, among the top 10 assets only two chains offer yields higher than 7.5%—Polkadot (15.1%) and Cosmos (18.9%).
Ethereum, the crypto industry’s second-largest cryptocurrency with market cap of over $200 billion by the end of September, is also dominating staking in PoS networks with a 79% share of the sector.
However, as noted by the report, a combination of record high staking rates and transaction activity increasingly shifting from Ethereum’s mainnet (L1) to the various layer-2 networks (L2s), resulted in a Q3 staking yield of just 4.5%—ETH's lowest on record.
At the same time, Ethereum’s staking rate grew 3.5% in Q3 to an all-time high of 22%.
The overall increase in stake rates also had an impact on the total value of staked assets: in Q3 2023, the value of staked assets saw a 3% increase compared to Q2 and a 17% increase year-over-year, reaching as much as $73.5 billion.
This positive development was somewhat offset by the decline in annualized rewards though, as the rewards for stakers fell to $4.1 billion—a 7% decrease from the last quarter and a more substantial 18% year-over-year.
Edited by Liam Kelly.