Ethereum staking rewards are experiencing an unprecedented rise, and here’s what’s driving it.
According to a report by The Block published earlier today, a remarkable development has occurred in the Ethereum network this week, with staking rewards achieving an annual yield of 8.6%. This new record, unseen since The Merge, is largely attributed to a sharp rise in on-chain gas fees propelled by the ongoing memecoin trading trend.
The Block further reports that Ethereum validators have seen a significant increase in their earnings, amassing a cumulative income of $46 million in the first week of May alone. This notable figure, representing a hefty 40% rise from the $33 million generated in the final week of April, was sourced from data compiled by ETH Store and presented on beaconcha.in. These earnings translate to nearly 25,000 ETH pocketed by validators within just one week.
As The Block explains, the memecoin trading frenzy has undeniably played a key role in this increase. Over the past week, Ethereum’s average transaction fees have consistently surpassed the 100 gwei mark, a level not seen since May 2022. This surge in gas fees, the report points out, has led to transaction costs exceeding $30 per swap for users. Yet, for validators, this development has apparently yielded significant advantages, augmenting their income from processing transactions on top of their regular validator rewards.
Citing beaconcha.in, The Block clarifies that the current staking rate provides an estimate of the annualized return that validators can anticipate. To engage in Ethereum’s consensus process, validators must stake a minimum of 32 ETH, currently valued at approximately $59,000.
There are two types of rewards for Ethereum validators: consensus rewards for proposing and attesting blocks, and transaction fees for processing transactions on the Ethereum network.
As The Block further notes, Ethereum staking has gained substantial relevance for institutional investors since the network transitioned to a proof-of-stake (PoS) consensus mechanism following The Merge. The recent Shapella upgrade has further increased its appeal by enabling validator withdrawals for the first time. At present, over 19 million ether, equating to a value of $34 billion, have been staked by 560,000 validator entities.
As of 6:35 p.m. UTC on 9 May 2023, ETH is trading at around $1,848, marking a 0.92% increase over the past 24 hours.