How Staking Rates Can Drive the Crypto Economy Forward

While the world eagerly awaits the approval of a spot bitcoin exchange-traded fund (ETF) in the U.S. there is another crypto innovation that promises to unleash a fervor of economic activity, enabling an even greater wave of mainstream adoption and convergence across the global financial system.

This article is part of CoinDesk’s “Staking Week.” Christopher Perkins is a managing partner and president of CoinFund.

This is the arrival of crypto-native staking rates, made possible by proof-of-stake (PoS) blockchains like Ethereum that will deliver the identical utility of traditional interest rates – closing a vital gap in its evolution and development for the crypto economy.

In traditional finance, interest rates underpin the largest markets in the world and serve as a fundamental pillar of economic activity. Staking rates can do the same for the crypto industry by delivering a new class of standardized benchmarks, powering next generation financial products, improving risk management and unlocking new functionality for institutions and consumers alike.

Staking rates are to crypto what interest rates are to traditional financial markets.

Interest rates drive modern economies. In traditional finance, interest rate decisions are highly centralized, controlled and reserved for the very upper echelons of government. Eight times a year, the Federal Open Market Committee (FOMC) meets to determine monetary policy and sets interest rates in the United States. Each decision by its 12 members has far-reaching effects on the global economy, impacting monetary policy, unemployment rates and consumer behavior.

Interest rates serve as important financial benchmarks for borrowing and lending and are used in valuations and asset pricing. They determine the cost of capital for businesses. Interest rates also power trillions of dollars of financial products, and the interest rate swap market alone underpins $500 trillion in notional exposure, making it the largest derivative asset class in the world.

Until recently, the crypto industry was completely devoid of anything close to fiat interest rates, leaving a major gap, slowing its evolution and leaving it relatively inaccessible to a large swath of market participants.

However, with Ethereum’s transition to proof-of-stake following “The Merge,” a…