• Ethereum has completed its Merge upgrade and now staking is possible on the network.
• The popularity of staking has grown since the Shapella upgrade, with 19% of total Ether supply currently staked.
• Analysts predict yields from staking to eventually drop to 1-2%, though there are many factors in play that could affect yield levels.

Ethereum’s Merge Upgrade

In September 2022, Ethereum underwent a major upgrade when it transitioned from a proof-of-work consensus to a proof-of-stake one – the so called ‘Merge’. This allowed users to stake their Ether tokens and earn rewards for doing so, with current yields standing at approximately 4% APY.

Staking Popularity

Since the Shapella upgrade in April, which allowed for Ether locked up in staking to be withdrawn, the popularity of Ethereum staking has increased significantly. Currently, 19% of the total Ether supply is staked – still lower than other major proof-of-stake coins but growing all the time.

Analyzing Yields

The yields earned from staking can fluctuate depending on demand on the network as well as other factors such as gas fees and competition between different wallets offering higher rewards for users who stake through them. Despite this unpredictability, analysts are predicting eventual yields of 1%-2%.

Stakers vs Token Holders

Due to inflationary models related to Proof-Of Stake (POS) networks, token holders needn’t worry about diminishing returns when more users join in on the action as they do not have an effect on each user’s reward rate directly. Instead rewards are divided among all active users meaning that healthy competition will help sustain or even increase yield levels over time.

Conclusion

It remains up for debate where exactly yield levels will land given all these variables at play but it’s clear that interest in Ethereum’s SHA256 POS protocol looks set to remain strong going forward with increasing numbers of users taking part in staking activities every day.