09.12.2021

JPMorgan experts told which component of the cryptocurrency niche will grow to $ 40 billion

The launch of the energy-efficient Ethereum 2.0 network will popularize a mechanism called Proof-of-Stake and make staking a more attractive source of income for both professional and individual investors, according to a new report from JPMorgan analysts.

According to the authors of the document, holders of coins in staking in PoS networks currently receive about $ 9 billion in income annually from their investments. And in the future, this indicator should only increase.

At the moment, Ethereum is working on the Proof-of-Work consensus algorithm, which also powers Bitcoin. This means that new blocks in the network are created by miners who have expensive computing equipment. They look for solutions for new blocks by choosing combinations – hashes – and receive a reward for this.

However, in the coming months, the cryptocurrency will switch to the Proof-of-Stake algorithm. This means that mining will essentially become virtual, and computing equipment is no longer needed to ensure the operation of the network and earn cryptocurrency. Instead, you will need to block a certain amount of coins. We wrote more about updating the Eth network to version 2.0 along with the scheduled update stages in a separate article. We recommend that you familiarize yourself in order to understand the meaning of what is happening in the niche.

According to representatives of the JP Morgan bank, in the future, making money in PoS networks will become a much more common option. That is, many people will join it, and the niche itself will bring more money due to the emergence of new projects.

How to make money on cryptocurrencies

Recall that staking is making a profit for blocking a certain amount of funds in cryptocurrency. In essence, staking is a guarantee that a validator – that is, a participant in the cryptocurrency network based on the Proof-of-Stake algorithm, which confirms the correctness of what is happening in the blockchain – will fulfill its duties in good faith. This means that if he suddenly allows dishonest behavior, his staking coins will be blocked. Or at least such a network participant will be fined.

For example, the penalty system on Eth2 is known as slashing. We are talking about reducing the deposit of a validator who violated the rules of the network or tried to harm it.

Experts are confident that with the transition of Ethereum to PoS, the volume of annual profit from staking will increase to $ 20 billion. According to their calculations, by 2025 the staking industry will grow to at least $ 40 billion on all blockchains suitable for this.

JPMorgan compared financial incentives in this area with cash, cash equivalents and fixed income instruments like US Treasuries. Here is an analyst quote from Cointelegraph.

Staking income can lower the opportunity cost of owning cryptocurrencies when compared to other investments in other asset classes, such as the US dollar, US Treasury bonds, or money market funds, in which the investment generates some positive nominal return. In fact, in the current environment, we see profitability as an incentive for investment.

cryptocurrency staking table

Top 10 cryptocurrencies for staking. Annualized returns are shown in the Reward column

According to the StakingRewards portal, among the ten largest cryptocurrencies in terms of staking capitalization, annual rewards for this process range from 3 to 13 percent. Note that this is a nominal return, since the real profit of validators depends on the number of coins that are staked.

Чем их больше, тем ниже доходность. Это объясняется тем, что разработчики фиксируют показатели эмиссии — то есть темпы выпуска монет. Показатель остаётся стабильным. Отсюда и следует проседание доходности стейкинга по мере популяризации криптовалюты.

Мы проверили актуальные данные: сегодня в стейкинге сети Eth2 заблокировано более 6 миллионов эфиров. Годовая доходность стейкинга при таком показателе составляет 6.4 процента — а это всё равно заметно больше, чем в большинстве мировых банков.

eth2 cryptocurrency staking

Показатели стейкинга в сети Eth2

В JPMorgan рассчитывают на долгосрочный рост крипторынка — эксперты уверены, что пассивный доход с криптовалют в паре с постоянным подорожанием монет служит дополнительным стимулом для вложений как со стороны крупных, так и мелких инвесторов.

That is, with a favorable development of the situation, Ethereum 2.0 can really find popularity and positively affect the demand for other PoS blockchains.

We believe that staking will indeed become more popular in the future. So far, this mechanism of earning is relatively new, and few have had time to get to know it. And since Ethereum is the second largest cryptocurrency by market capitalization after Bitcoin, its transition to PoS will draw people’s attention to this algorithm and at the same time motivate other developers to make similar changes. They will surely be relevant given the current criticism of the non-ecological nature of mining BTC and other PoW coins in general.

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