A victim of its own success? The rising number of validators on Ethereum is driving staking rewards down, according to CoinDesk Indices data. But other chains are weak competition, accounting for token supply inflation and real yields.
As more validators participate in the consensus of the network, the base reward distribution to the entire network increases proportional to the square root of the additional validators. The result is that the reward for each individual validator decreases slightly.
This constant stream of new staking participants — the current number of validators sits at about 800,000 — has been so substantial that it has even led some to propose aon the number of new validators that can enter the pool on any given day. The rationale being that the current “churn” limit of 12 new validators per epoch, , is unsustainable long term.
Regardless, the near-doubling in validators since the Merge one year ago has been impressive. Staking is clearly very popular. But Ethereum is far from the only proof-of-stake protocol in town, which raises the question: What — if anything — sets it apart from the rest? Tokenomics matter. Pre-Merge, ether’s annualized supply inflation was over 3%. At the moment ... it hovers right around 0%.
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