Only Polkadot ($DOT) and Cosmos ($ATOM) Offer Higher Real Staking Yields Than Ethereum, Claims Bloomberg Report

According to a recent Bloomberg report, when it comes to staking yields, only two proof-of-stake (PoS) blockchains — Polkadot ($DOT) and Cosmos ($ATOM) — outdo Ethereum ($ETH).

As The Daily Hodl reported on October 9, in the October 2022 edition of Bloomberg Intelligence’s Crypto Outlook report, analysts/strategists Mike McGlone and Jamie Douglas Coutts compared the staking yields of various PoS L1 blockchains to that of Ethereum, and found that only Polkadot and Cosmos were able to outperform Ethereum:

As a result of Ethereum’s dominant market share in fee income and sound monetary (issuance) policy, capital deployment in the crypto economy is likely to start pricing risk relative to Ethereum’s real/adjusted rate (yield). On Bloomberg’s list of layer-1 crypto assets, only two networks have real yields that trade with a positive spread to Ethereum’s benchmark rate of 5.03%.

Polkadot trades at a 0.77% premium while Cosmos is at a 0.10% premium. The assets which trade at negative spreads may be victims of mispricing. Inflation/issuance for these assets may need to undergo a radical reduction, similar to Ethereum, in order to attract more capital...

The emergence of crypto as an asset class in conjunction with a yield component presents a new set of considerations for investors when assessing the risk/reward opportunities in this space. Given the volatility and newness of the demand for smart contract use, staking assets could be considered as equivalent to junk bonds. Yields for proof-of-stake are similar to corporate bonds in that they’re tied to the fees/cash flows
of the network/company.”

In a blog post published on 15 September 2022, Ali Yaha, a General Partner at Silicon Valley based venture capital firm Andreessen Horowitz (“a16z”), called the Merge “an insane feat” since this upgrade “involved hot-swapping the most important component of Ethereum’s architecture – its consensus mechanism – *while it was running*.” Yaha noted that “all this occurred while maintaining perfect uptime for millions of users, thousands of decentralized applications (dapps), and hundreds of billions of dollars secured.”

Yaha then said that were some of the main advantges of Ethereum’s move to PoS consensus:

  • Post-Merge, Ethereum is now 100x+ more energy-efficient than it was before. Participating in consensus no longer expends the enormous amount of electricity that PoW does. After The Merge, energy usage of ETH will be comparable to the datacenters of web2.
  • PoS has direct access to each validator’s “stake”, the funds, or skin-in-the-game, that validators deposit to secure the network. That allows PoS incentives to be far more granular, further increasing security.
  • … anyone with 32 ETH can now participate as a validator on Ethereum.
  • On a PoS blockchain, transactions that go through consensus are final… Transaction finality on Ethereum will lay the groundwork for future work that will improve Ethereum’s ability to scale (via “layer 2” solutions such as rollups), connect to other blockchains (via cross-chain bridges), and build better abstractions for developers that are easier to use and reason about.

He also mentioned that the Merge is “a big deal” that “brings us closer to a world that benefits from an efficient and secure layer for decentralized computation that can support the applications we all want to build.”

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