The Ethereum Merge

In this article , we aim to focus and provide an analysis on “The Ethereum Merge” .

An Overview Of ‘The Ethereum Merge’

The Merge: What does it mean? Why should we merge?

With the merge, Ethereum makes the transition from proof-of-work (PoW) to proof-of-stake (PoS). The proof-of-work method of consensus on the blockchain relies on the lockup of a staker’s Ethereum. Computing power is required to secure blockchain consensus. This is done by people (miners) who secure the network.
In order to solve the blockchain trilemma, Ethereum has worked on a variety of problems:
Security , decentralization and scalability The blockchain so far has compromised on at least one of these features. However, it is still helpful.

What are the benefits of the Merge?

The Merge allows for decentralization and security by requiring a minimal number of nodes and reducing the amount of work required to run nodes Compared to PoW, PoS requires 99% less energy Through scalability, it opens the possibility of sharding and 100k TPS in the future.

How does it works ?

  • Ethereum is deposited into your account.
  • Validators stake cryptocurrency with the protocol.
  • You receive the staked ETH in the form of a liquid (sellable) wrapper.
  • You will earn interest on that. If you want, you can trade in these liquid wrappers.

For Example: All of RocketPool, Lido, and StaFi let you use Ethereum for this, although their mechanics, decentralization, and composition differ slightly.ETH tokens can be used to earn interest.

Below is an announcement about ‘The Merge’ on Ethereum.

Overview of Staking Deposits and Amount Staked On ETH2

This chart shows the number of ETH2 staking deposits and the value of staked ETH on a daily basis since January 1,2022. Observed maximum deposits were 6.35K on March 15, 2022. A steadily increasing trend in deposits has been observed.

From the below graph we can see the staked Ethereum trend is increasing. Maximum Staked Eth of 202.26K was observed in March 15, 2022.There was an announcement that a new Ethereum version is coming soon, and also that by completing Kiln, Ethereum is now closer than ever to the “merge.” We can see that the maximum amount of Eth has been staked on March 15, 2022. In addition, we can see the total staked Ethereum reached as much as 10Millions.

From the below graph we can see a week over week grpwth of staked Ethereum . We can see that on the week Mar13-19 2022, a large percentage of ETH has been staked from the previous week. It might be due to the announcement of Merge coming closer as well as a greater quantity of Ethereum is staking by stakers to use its benefits.

Staking Deposits and Amount Staked On ETH2 By Top Staking Services

This section allows us to view the staking deposits and amounts staked upon ETH2 by multiple stake providers, as well as to see the stakers and stake amounts by percentage on ETH2. By comparing the number of ETH staking deposits by different providers, the LIDO is showing the maximum number of deposits.

Over three quarters of the total deposits (77.88%) came from LIDO stake providers.The amount of deposits has risen in recent months. According to the below graph showing ETH stake deposits by various providers, after LIDO, there are more ETH stake deposits in the Rocket Pool since Jan 1, 2022.

In the graph below you can see the amount of Ethereum staked by different providers. The total amount of Ethereum staked between January 1, 2022 and March 23, 2022 was 1.35M. More than three quarters (82.26%) of the total staked Eth was contributed by LIDO.

Based on the below given heat map, we can see where an amount of Ethereum has been staked since January 1, 2022 on which day of the week.We can see on Tuesday of Week 11 2022 (March 13-19,2022) that there is a significant amount of ethreum staked.

We can see that there has been a significant increase of 248.53% of ETH staked on Week 11 of 2022 based on the weekly growth of staked Ethereum by all providers.

Staking Deposits and Amount Staked On ETH2 By LIDO

As part of this section, we will look at how LIDO stakes on ETH and the amount staked. Let’s take a moment to introduce LIDO Stake provider before we proceed.

What is Lido and what problems does Lido solve?

Ethereum’s transition to proof of stake (PoS) began on December 1st, 2020, with the launch of the Beacon Chain. As a result, holders of Ethereum tokens were able to earn rewards by staking their tokens to protect the Ethereum network. However, staking is not something a typical ETH cryptocurreny holder can do because it requires extensive technical knowledge to make it work. Here are some issues associated with staking ETH tokens.

1. Technical expertise: It is important for a person to have the ability to install and update software all the time so as to stay current with the latest release of the stake module. The failure to run the software due to power outages or other issues results in a loss of rewards and in the worst case, staked Ethereum.

2. No unstaking: Due to the fact that Ethereum 2.0 has not yet been launched and no deadline has been set, once ETH tokens have been staked they cannot be withdrawn until Ethereum 2.0 is launched. Because there is no deadline for Ethereum 2.0 network launch, no one knows when they will be able to withdraw their funds. Probably by the end of 2023, maybe even earlier. All depends on how quickly Ethereum core developers complete the transition from Proof of Work to Proof of Stake.   

3. ETH Token requirements: In order to serve as a validator and stake tokens, one must have ETH tokens worth 32 ETH. At today’s ETH price it is more than 100,000 USD investment one must make to start earning staking rewards. 

Lido tackles all these problems head on and solves them elegantly. With LIDO, anyone can stake ETH tokens even if they only have a fraction of them. Lido’s liquid staking solution for Ethereum is backed by the biggest providers.

How Lido Works?

In essence, Lido is an Ethereum smart contract that allows ETH holders with less than 32 ETH to pool their funds and earn rewards. Pooled funds are distributed among selected operators of Ethereum validators that are required for staking operations.

Lido also solves the liquidity problem of ETH stakers by issuing a special ERC20 token, stETH, at a 1:1 ratio when users deposit their ETH for staking. StETH tokens can be traded, transferred, and used in major Defi protocols, just like ETH. If a user wishes to unstake their ETH, they can sell stETH on Curve for ETH and use it however pleases them.

Below are graphs showing the number of staking deposits LIDO made on the Ethereum network as well as the amount staked by LIDO on Ethereum. Between January 1, 2022 and March 23, 2022, 1.11M Staked Ethereum was generated. A maximum of 196.96K was observed in Staked Ethereum on March 15, 2022, and a minimum of 608 was observed on February 14, 2022.The staked Ethereum by LIDO trend shows an upward trend.

Here from the below graph we can see the number of ETH staking deposits by LIDO stake providers since Jan 1, 2022 . Trends in staked Ethereum are rising. There were 34.72K staked deposits by LIDO between January 1, 2022 and March 23, 2022. The highest LIDO staked deposit of 6.16K was observed on March 15, 2022. Deposits were on the rise during this period.

This heat map shows the number of staked deposits for LIDO on each day of the week and on a weekly basis since January 1, 2022 . LIDO staked a greater number of deposits during Week11 2022 (March 13-19,2022). 

In the below graph, we can see that the number of users that staked ETH with LIDO has been rising week over week since Jan 1 ,2022 and even more recently since Mar 13-19,2022. As a result of Kiln’s completion, Ethereum is now closer to merging than ever before. 

Staking Deposits and Amount Staked On ETH2 By RocketPool

The Rocketpool is ranked second among all staking providers based on amount staked and by number of deposits on Ethereum 2.  In this section, we analyze Rocketpool’s staking deposits and staked amounts on ETH since January 1,2022. First, let’s discuss about Rocketpool briefly.

What is RocketPool?

Rocket Pool is an Ethereum 2.0 staking pool that enables users to stake their cryptocurrency. In addition to empowering the decentralization of the Ethereum ecosystem and increasing the security of it, the protocol aims to reduce both the capital and hardware requirements for staking on ETH 2.0. Towards this end, Rocket Pool facilitates trustless stake on an Ethereum node by letting users choose their node operator anonymously.

From the graphs below, we can see how much Ethereum has been staked and also how many deposits have been staked by Rocketpool. Staked Eth by Rocketpool during the period between January 2, 2022 and March 23, 2022 was 75.9K. It reached its maximum on March 11, 2022, with a maximum of 8.82K. There was an upward trend in staked Eth during the period.

The following heatmap shows each day how much Ethereum has been staked by Rocketpool every week. In this chart, we can see that staked Ethereum has increased significantly from Week10,2022 on. It may be a sign that the time for the Ethereum network merge is approaching.

From the below graph we can find out how many Ethereum deposits have been made by Rocketpool since January 1st 2022. In the beginning of 2022, no deposits were staked by the Rocket Pool at all. Later from February 2022 onwards, we can observe an increasing number of deposits staked by this pool. After March 9, 2022, the number of deposits by Rocket pool will increase significantly, and we should see further increases in deposits. All of this is because of the nearest period of achievement for the Merge on the Ethereum network.

We can see in the chart above that the increase in staked Ethereum by Rocketpool is growing week by week. What we can see is that during Week 10, 2022 (March 8-12), there was a more than 350% increase in staked Ethereum by Rocketpool.

LIDO Vs Rockepool

This section allows us to compare two of the top staking services available on Ethereum network and we will get an idea of which one is better. On this page we can compare the staked number of deposits that LIDO and Rocket pool have made since January 1, 2002 and also the staked amount of deposits made by both LIDO and Rocket pool.

We can see from the following graph that the staked amount as well as the staking deposits by LIDO are very high on March 15,2022. The positive effect is that we could be considering more Ethereum deposits, as well as the amount of Ethereum staked by LIDO is constantly increasing from March 2022 onward. It is not surprising that the merge period has moved so closely on Ethereum network, and that we are seeing a lot of staking Ethereum amounts with the number of deposits also being increased dramatically.

Since January 1,2022, you can see from the following graph that the staked Ethereum by LIDO and Rocketpool has continued to grow week over week. According to Rocketpool.co, we can see on Week10,2022(Mar8-13) that Ethereum was staked a lot more than it was the previous week, which is almost 350% more than it was the previous week. Similarly, we can see that the staking on LIDO on week 11,2022(Mar13-19) is almost 270% higher than it was on week 10,2021.

Conclusion

  • According to the analysis above, it can be seen that the number of stake deposits for Ethereum, as well as the number of stakes staked, is trending upwards. In particular, we can see that the maximum amount of Eth has been staked on March 15, 2022. All of this change can be attributed to the recent Ethereum announcements. It has been announced that a new version of Ethereum will be released soon, adding to what was already an announcement that Kiln is nearing completion, making it more probable than ever before that Ethereum can “merge.” Furthermore, we can see that the total staked in Ethereum has reached up to very impressive 10 million dollars.
  • In regards to the LIDO staking service, the staked amount of Ethereum and the staked number of deposits are very high when compared with other staking service providers. Because holders of Ethereum tokens were able to earn rewards for protecting the Ethereum network by staking their tokens. Staking is, however, not something most ETH holders can do since it requires a great deal of technical expertise. These expertise features made it very popular.
  • From the above analysis ,the LIDO staking service providers represents 82.26% of the Ethereum staked amount and 77.88% of the staked deposits out of all Ethereum staked amount and staked deposits respectively.
  • RocketPool staking service provider had the second highest number of Ethereum deposits and Ethereum staked amounts after LIDO staking providers.
  • According to my analysis above, there have been a number of deposits of Ethereum and also the staked amount of Ethereum has increased from March 2022 onwards.  Announcing that Ethereum’s Merge is imminent and completing Kiln, Ethereum is now closer than ever before to the “merge.” 

Leave a Reply