In the last month, the virtual asset market has shown optimism, with Bitcoin surpassing its all-time high, leading to an unprecedented expansion in the scale of staking, where virtual assets are deposited to earn interest. This is driven by the potential for higher revenue than the current interest rates, along with significant demand for large-scale deposits, particularly from institutions.
Staking allows holders of virtual assets to earn revenue of 3% to 5% annually in the form of interest when they deposit or entrust their virtual assets. This revenue comes as a reward for utilizing the deposited virtual assets in transaction and payment network processing, making it similar to the structure of bank deposits that earn interest.
According to StakingRewards, a specialized firm in virtual asset staking, the total value (market capitalization) of the top 100 virtual assets that are deposited reached $334.7 billion (approximately 447 trillion won) as of the previous day. The most widely deposited virtual asset is Ethereum, with around 180 trillion won. Currently, 30% of the circulating Ethereum is staked. Additionally, the staking values for Solana (SOL) are 93 trillion won, Sui (SUI) is 35 trillion won, Binance Coin (BNB) is 31 trillion won, and Hype (HYPE) is 23 trillion won.
This deposit scale is the largest on record. According to DeFiLlama, a decentralized finance information site, the market capitalization of virtual assets deposited with staking service providers reached a record 101 trillion won on the 28th of last month. Considering that it was 41 trillion won in January, this represents a 2.5-fold increase in less than a year.
Generally, when the prices of virtual assets rise, the value of already deposited virtual assets increases, leading to an expansion in the scale of deposits. The price of Ethereum, which is most frequently used for staking, rose to as high as $4,000 on the 12th of last month, the highest level in around three years.
Interest earned from staking varies depending on the virtual asset. Typically, it is known that one can earn interest between 3% to 5% annually. Compared to recent low interest rates, this can yield higher revenue than bank deposits. As more people have started investing in virtual assets like Bitcoin and Ethereum, there has been a rising trend of investors looking to deposit rather than simply hold their virtual assets to earn additional revenue.
In particular, the demand for deposits has been increasing, primarily from institutions, leading to an expansion of scale. Institutions that adopt virtual assets as part of their portfolio purchase them on a large scale and entrust them to custodians, who then redeposit the virtual assets to share the revenue. Specialized banks and custodians for virtual assets, like Anchorage in the U.S., are expanding their deposit services targeting institutions.
Global asset management firms operating Ethereum exchange-traded funds (ETFs) are also showing interest in deposits. Previously, BlackRock submitted a request to the U.S. Securities and Exchange Commission (SEC) on the 16th of last month (local time) to add staking functionality to its operating Ethereum ETF. The request indicated a desire to earn additional revenue by staking the Ethereum held within the ETF, in addition to potential price increases for Ethereum. Franklin Templeton and Grayscale, firms managing Ethereum ETFs, have made similar requests to the SEC.
There are three ways for individual investors to engage in staking. One method is direct deposits of their owned virtual assets, which requires a certain level of expertise. Most opt to entrust their virtual assets to service providers for deposits or deposit them at exchanges like Binance. Domestic exchanges like Upbit and Bithumb also operate deposit services. The deposit scale was estimated to be around 4 trillion won in January.