Coinbase Prime Brings Ethereum Staking To US Institutional Clients

Table of Contents

• Another Option For Institutions
• Much Ado About Staking
• Ethereum’s Shift To Proof-of-Stake

Coinbase announced in a blog post published on Monday that Coinbase Prime was adding Ethereum to its growing list of staking options for US domestic institutional clients. This offering allows another avenue for financial institutions who wish to enter the crypto space but are unsure how to do it.

Another Option For Institutions

Coinbase’s new offering gives institutions that have been eying the crypto industry’s burgeoning growth another crypto on-ramp to enter the space. The option of staking and generating yield could interest larger firms looking to park their funds and accrue interest. Apart from Ethereum, Coinbase Prime will also be offering staking tokens for other blockchains such as Polkadot, Solana, Cosmos, Tezos, and Celo.

Interested clients will be able to create a wallet, decide the amount they wish to stake, and initiate staking through their Coinbase asset page on their Coinbase Prime account. Coinbase will hold the withdrawal keys in the company’s cold storage custody vault, and staking transactions would be required to reach a consensus before execution.

Much Ado About Staking

Staking offers passive income on assets already held in custody by allowing them to provide valuable work in the form of security to the blockchain. Ethereum rewards stakers that act in the network’s best interest and punishes those that act against the network or fail to secure the network for any reason. This makes it essential to stake with a reputable staking partner that could help to minimize risk while maximizing rewards.

Staking assets can be compared to earning compound interest. However, this is different from traditional markets when dividends are reinvested. Staking rewards are paid in the form of the token that users have staked, and users will be able to reinvest these tokens, earning a significantly higher payout. The staked tokens are also typically stored in their respective wallets allowing users to earn yield without rehypothecation.

Ethereum’s Shift To Proof-of-Stake

With the Ethereum blockchain transitioning to the Proof-of-Stake consensus algorithm, validators who have staked ETH will replace miners in running and securing the Ethereum network. As a result, staking will be playing a significant role in the blockchain’s future, and there could be a significant increase in rewards accrued through staking. Coinbase had predicted at the beginning of the year that it expects ETH staking rewards to hit 12% APR once the merge had been completed. At the time of writing, data from StakingRewards shows that yields on staking pools had an average reward of 4.08%.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.