🧠 Food for thought

Implications, context, and why it matters.

Staking fits into a new treasury plan

• The staking plan sits inside the foundation’s first formal Treasury Policy. It moves from holding ETH to managing it more actively 1.
• The goal is a self-funding loop where staking rewards pay for the Ethereum Foundation’s operations. The foundation also says it sells assets at times across market cycles to keep development funded 2.
• Execution runs through open-source tools, Dirk and Vouch, to manage validators. Validators are software that runs Ethereum’s “proof-of-stake” process and earns staking rewards 3.
• Staking comes alongside other treasury steps, including over-the-counter (OTC) sales. OTC sales are privately negotiated ETH trades used to fund operations directly 2.

Lower staking yield raises decentralization risks

• The Ethereum Foundation started staking while network yields kept sliding. They fell from 3.4% earlier this year to about 2.7% now, based on the CoinDesk Composite Ether Staking Rate 4.
• Academic models connect smaller rewards with tighter economics for solo stakers, individuals staking on their own. They often react faster to changes in profitability than stakers using centralized exchanges or liquid staking providers 5.
• That squeeze can steer more ETH toward large liquid staking protocols like Lido (a service that pools users’ ETH for staking). Lido held about 32% of all staked ETH as of Oct. 18, 2023, per the cited analysis 6.
• The cited analysis describes a “tragedy of the commons” problem. Individual choices that favor convenient platforms can weaken network decentralization over time 6.