12 statistics about the state of staking in 2022

For cryptocurrency investors aiming to pile up their earnings, the Proof of Stake (PoS) consensus is opening new opportunities. With PoS, they are not necessarily required to possess the latest hardware and use a great deal of energy to outperform other miners in the race to validate blocks as quickly as possible. With PoS, investors need only to stake a small portion of their cryptocurrency for the opportunity to be selected to validate a block and earn rewards for it.

But are cryptocurrency investors taking advantage of such brand-new possibilities? To learn more, read on as we discuss issues on the PoS system and developments, staking market size, as well as users’ thoughts and perspectives on staking cryptocurrency.

So you can learn from experienced professionals in the field how to better understand what lies in store so as to pick up some survival tips.

When it comes to staked token value, the top 138 PoS protocols possessed $324 billion at their peak in 2021, but in 2022, there was a startling 78% decline, suggesting that many users missed this golden opportunity. What occurred, and where are we going from here?

Despite the weak performance of the cryptocurrency market in Q1 2022, some important staking steps set new records. The mean staking rate rose by 14% Q/Q to 49.3%, and the mean staking yields climbed by 11% Q/Q to 15.4%.

Hence, yearly staking returns increased by 57% compared to Q1 2021, reaching a record high of slightly below $15 billion.

Then, despite the steep decline in cryptocurrency assets in Q2, staking rates and yields became steady from their record levels in Q1. The mean staking yield declined from 15.4% in Q1 to 14.6% in Q2, and the mean staking rate essentially barely changed. But the annual staking rewards were reduced by 73% due to the substantial decline in market value.

As a result of Ethereum’s Great Merge on September 15, 2022, PoS assets recovered from their Q2 lows, gaining market share comparable to Bitcoin, stablecoins, and the entire crypto market. The top 35 PoS assets saw a 15% Q/Q gain in market capitalization to $236BN, but the overall crypto market cap only saw a 6% growth to $979BN.

Moreover, the risk of centralization has reportedly increased as a result of greater validator activity. This indicates that larger validators may afford to reduce commission costs in order to increase AUM. Because of this, decentralization is seriously threatened by key counterparts who generate more overall income, have more opportunities to construct better infrastructure, and have greater voting power over protocols.

Industry experts advise smaller validators to concentrate on alternate revenue streams, provide value-added goods and services, and use new technologies, including liquid staking, MEV capture developments, and decentralized validator technology (DVT), in order to reduce such difficulties for this sector’s continuity and growing decentralization.

In the following, in so far as to recap the staking state of the market in 2022, 999 PoS crypto users were surveyed about their staking experiences, revealing their motivations, methods, and obstacles that prevent them from staking. Here are some of the results.

1. The majority of respondents (56%) have staked earlier:

Among the cryptocurrency investors surveyed, well over half of them have previously staked their coins.

2. Users stake crypto in order to generate passive income:

Earning passive income is revealed to be the main motive for cryptocurrency investors. Higher profits from staking and lowered transaction fees are the two other common reasons.

3. What is the most typical method of staking? To establish one’s own validator nodes:

Setting up a validator node is an ideal technique for staking. However, they are also using exchanges or third-party staking services to stake their cryptocurrency. A staking pool and liquid staking are two other recommended methods of staking.

It’s important to point out that operating one’s own validator is the most difficult but direct route to stake. This involves technical expertise, but once it is set up, you can begin hiring delegators who pay you tokens to stake on their behalf in exchange for a fee that is deducted from their staking profits.

4. To maximize their profits, they built up their own nodes:

Owners of validator nodes set them up since they think doing so will increase their earnings and yields. However, they also set them up to have more dominance over its technical elements, such as developing a dApp or quickly accessing blockchain data.

5. Internet connection is still a trouble:

The major issue in setting up a validator node is having stable internet connections, as this could negatively affect the validation process. Keeping their network system secure is another problem.

6. In case they didn’t stake their cryptos, they would spend them for CeFi:

How would they spend their cryptocurrency if they weren’t supposed to stake it? The majority of people surveyed claimed they would use cryptos for CeFi lending using BlockFi, Celsius, Ledn, or other platforms. Additionally, instead of staking protocol, they would use protocols such as Aave and Compound to put crypto into DeFi lending.

7. Users who were reluctant to stake actually did not want to lock up their assets:

What about people who did not stake their cryptocurrency? They claim that the main reason why they are hesitant is that they deem the minimal lock-up period too long, so they were reluctant to lock up their assets. Additionally, they don’t stake because they think they can get better profits elsewhere.

8. What might convince them to change their minds? Higher profits:

Those who had never staked previously asserted they could reconsider it if they were offered bigger benefits, making it worthwhile to lock up their funds for a while. Furthermore, they favor lowering the minimum stake periods.

In fact staking high yield is dedicated to increasing the long-term viability of PoS protocols, making it possible for investors and validators to fulfill their objectives. The crypto industry will flourish if it heads the advice of such insightful results.

9. Smart contracts pose the greatest risk:

Every business effort has some inherent risk, but users who have staked, claim that the security of smart contracts poses the greatest threat. Due to the possibility of missing out on other chances while assets are locked up, opportunity costs pose additional risks to investors.

The risks associated with staking are minimal, although certain Blockchains can “slash” stakes so as to decrease their holdings if the validator you select behaves inappropriately.

Yet, there is transparency in staking stablecoins. Discovering precisely what it does, when, and why can be accomplished by digging deeper into its specifications.

But such technical and operational risks are manageable. Every client, including the consensus and execution layers, is open source.

Block production will keep going as long as the protocol is useful, and proposers and attesters of such blocks will receive their returns.

10. 56% of users intend to stake crypto in the new year:

Most of the cryptocurrency investors surveyed are planning to start staking. More than one-third of those who make up that figure has never staked before, whereas roughly two-thirds have staked in the past.

11. They intend to stake 20% to 30% of their whole holdings:

The majority of individuals who intend to stake in the upcoming year aim to stake 20% to 30% of their portfolios. The second-largest group also intends to invest anywhere between 61% and 70% of their portfolio, whereas the third-largest group intends to stake around 41% and 50%.

12. Lock-up periods prevent some users from planning to stake crypto:

Several people still, though, have no plans to stake in the upcoming year. Why? They are unwilling to stake owing to missing opportunities associated with lock-ups, which is similar to the raised issues earlier. Additionally, they fear technical challenges and hacking too.

PoS is the new frontier of blockchain, and liquid staking can enable individuals who are afraid to stake due to the need to lock up their assets. In this way, they can stake their cryptocurrency while still having access to it when it is locked up. Investors will be able to enter the future of cryptocurrency once the largest obstacle to staking is removed.

To summarize, Ethereum, the second-largest cryptocurrency, converted to proof-of-stake in 2022, which brought crypto staking into the spotlight. Especially for Ethereum, which didn’t provide a means to unstake ETH coins in 2022, liquid staking was important, with protocols like Lido laying the groundwork.

Soon in 2023, Ethereum is anticipated to launch its testnet for the system’s Shanghai upgrade. According to anticipated revisions, the upgrade will eventually enable ETH’s unstaking.

Staking may gain a significant pace in 2023 as cryptocurrency investors seek out more secured payouts than crypto lending, especially given the rising interest in massively staked assets like Cardano (which has 72% of its total supply staked).

It might have crossed your mind where you should stake by this point. Centralized exchanges have simplified the procedure, but staking in a pool, such as those offered by Cryptal.global, is almost as simple and allows you to retain ownership of your crypto tokens.