Five Reasons Why the World Needs a Standardized Ethereum Staking Rate

Staking rates are to crypto what interest rates are to traditional finance. Ethereum’s transition a year ago to proof-of-stake with “The Merge” was an incredible accomplishment for its ecosystem that delivered obvious enhancements to network security and reduced its energy footprint by 99.95%.

This shift, which made it so validators are rewarded with both protocol emissions and priority transaction fees, also unlocked something perhaps less obvious but absolutely groundbreaking for Ethereum: the introduction of a native interest rate. Staking ether (ETH), the ecosystem’s native token, now pays an interest rate. This forms a sort of bedrock layer – similar to the role interest rates play in traditional finance – that could power a new, global staking economy. For this to work, though, there must be a reference rate, so investors know what the benchmark is at any given time – a reliable number derived by observing the mean, annualized returns across a comprehensive validator population.

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A standardized staking rate built on social consensus will serve as a foundational pillar of the crypto economy. It will catalyze new financial instruments and capabilities and unlock a new wave of consumer and institutional adoption.

Here are five reasons why the world needs a standardized staking rate:

1. Benchmarking: Standardized interest rates are foundational across global finance. They serve as reference rates and performance indicators, and enable derivatives that serve as risk assessment tools. A standardized benchmark would help market participants clearly identify relative performance to Ethereum’s benchmark rate. Like an exchange-traded fund (ETF), which integrates efficiently into traditional financial securities infrastructure, a standardized staking rate benchmark would neatly fit into traditional systems – just like any other fiat reference rate. It would be a big deal for institutions. Today, institutional staking providers pay clients variable, bespoke, annual percentage yields (APYs) or floating rates. Offering yield returns relative to a common reference rate would give end…