Ethereum upgrades could fuel a $ 40 billion staking industry, according to a JP Morgan report. JP Morgan estimates the staking industry is currently worth $ 9 billion and that that number could climb to $ 40 billion by 2025.
The report speculates that the introduction of ETH 2.0 could lead to greater adoption of the coin and increase payouts when used to $ 20 billion in the first few years after its introduction. $ 40 billion is a figure that could be reached by 2025.
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The report comes from two JP Morgan analysts who said the returns on staking are an attractive investment in this zero interest rate climate. Referring to the banks’ low interest rates on customer savings.
We introduce: Marriageum 2.0
ETH 2.0 is an upgrade of the Ethereum network that will help improve network security and provide more scalability. ETH 2.0 aims to improve the overall efficiency of the network by introducing sharding. Sharding is simply the process of breaking up a database into smaller pieces so that the network is better able to handle more load.
The ETH 2.0 upgrade will transform the network from proof of work to proof of stake. Drastically reducing the amount of energy required to mine the coins and confirm transactions on the network.
Since proof of work requires machines to solve mathematical equations to confirm transactions on a network, the energy consumption is enormous. Bitcoin and Ethereum mining are still using proof-of-work mechanisms, leading to growing energy consumption concerns in the crypto mining industry. Mining is reputedly the 33rd largest consumer of energy in the world.
Current total DeFi market capitalization | Source: Crypto Total DeFi Market Cap on TradingView.com
The Proof of Stake, on the other hand, achieves the same result of confirming transactions on the blockchain without solving complex mathematical equations. The proof of stake enables coin holders to validate a transaction. The mechanism uses a pseudo-random selection process to select a node as the validator for the next block.
According to the Ethereum website, this will be done in three stages. The first is the beacon chain. The Beacon Chain is already live and with it came staking. It will also lay the foundation for future upgrades and coordinate the entire system.
Next is the merge. This will be the merging of the mainnet Ethereum with the Beacon Chain. The merger is scheduled to go live in 2021.
Lastly, the shard chains are added. Shard chains will increase Ethereum’s capacity to process transactions and store data. The ETA for adding shard chains has been set for 2022.
Staking brings significantly more income
The report elaborated on why staking might be the new preferred form of investment. The staking offers a return of up to 13% on crypto balances and in some cases more. Compared to traditional banks and investments like bonds, this is a much more attractive investment option for investors.
“Returns achieved through staking can reduce the opportunity costs of owning cryptocurrencies compared to other investments in other asset classes such as US dollars, US treasures or money market funds, in which investments achieve a certain positive nominal return.” – Analysts from JP Morgan report on the staking.
The report also indicated that rewards from staking could be a way to moderate inflation. Staking as a way of generating passive income will increase.
Related reading | How Ethereum Can Reach $ 2 Trillion in Market Cap, Matthew Sigel
The current market capitalization of staking tokens has already exceeded $ 150 billion. And that number will only continue to grow as staking becomes more mainstream.
JP Morgan has been trying to offer crypto options to its clients even though their CEO Jamie Dimon does not support crypto. The company is reportedly preparing to offer a Bitcoin fund to its customers.
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