R E P O RT

Ethereum 2.0
Staking Ecosystem
Report
A user report on the landscape of existing ether holders and
their intentions, preferences, motivations, and pain points when
it comes to staking on the Ethereum 2.0 network.

Ethereum 2.0 Staking Ecosystem Report | A ConsenSys Insights Report May 2020
R E P O R T

Outline
Executive Summary 3

Glossary 4

Introduction to Ethereum 2.0 5

Understanding Ethereum 2.0 6
What is Phase 0? 7

Research Objectives and Methodology 8

Macro Research Findings 9

Detailed Research Findings 14

Respondents Who Plan to Run Their Own Validators 14
Respondents Who Plan to Use a Third Party Provider 19
Respondents Who Are Undecided About Staking 22
Respondents Who Do Not Plan to Stake 26
Staking Providers 28

Discussions and Recommendations 33

Conclusion 38

Authors 39

Ethereum 2.0 Staking Ecosystem Report | A ConsenSys Insights Report 2

R E P O R T

Executive Summary
The launch of the first phase of Ethereum 2.0 this year behaviors, and needs of existing ETH holders and how
will mark the beginning of the next evolution of the public their participation in Ethereum 2.0 can be accelerated and
Ethereum mainnet. One of the most significant upgrades in optimized.
Ethereum 2.0 is the switch from a Proof of Work (PoW) to
a Proof of Stake (PoS) consensus algorithm. This upgrade Pursuant to this objective, ConsenSys has conducted a
will result in improved scalability, network maintenance wide-ranging quantitative user research study to drive the
incentives, energy efficiency, and security. industry’s collective understanding of ETH holders’ behaviors,
motivations, needs, and pain-points when it comes to staking
This new network architecture provides a novel opportunity on Ethereum 2.0.
for a broad category of ETH holders to create a continuous
revenue-generating capability for providing public Broad conclusions were drawn from 287 respondents to an
infrastructure to the Ethereum community. online survey of existing ETH holders. Respondents were
categorized based on their participation preferences for
Core to the success of a PoS network is the willingness of Eth2 staking, enabling the identification of common and
participants to stake their ether (ETH) on the network in diverging goals, needs, and characteristics. The four primary
order to adequately secure the blockchain. It is imperative, participant behaviors determined from the survey include:
therefore, to understand the staking preferences,

This report aims to inform key design and product considerations to encourage the broadest possible participation from different
user personas, while providing informative analysis and strategic recommendations for protocol teams, client developers, and
third-party staking providers. Our findings indicate that education, trust, incentives, value-added features, and potential risk
mitigants play a critical role in driving confidence and adoption among existing ETH holders.

Ethereum 2.0 Staking Ecosystem Report | A ConsenSys Insights Report 3

Glossary
Proof of Work (PoW): Proof of Stake (PoS):
Proof of Work is a class of consensus algorithm that Proof of Stake (PoS) is a class of consensus algorithm that
rewards miners who solve mathematical problems to pro- selects and rewards validators as a function of a vali-
pose and/or attest new blocks. With PoW, the probability dator’s economic stake in the network. Unlike Proof of
of mining a block and thus receiving block rewards is a Work, the probability of creating and/or attesting a block
function of relative hash power in the network. and maintaining security in the network is not a result of
hashpower from burning energy, but rather the result of
State: economic value-at-loss.
State is the entire set of information that describes a sys-
tem at any point in time. On Ethereum, this is the current Sharding
account set containing balances, smart contract code, Sharding is a form of database partitioning, also known as
and nonces at any given moment. Each transaction alters horizontal partitioning, wherein large databases are divid-
this state into an entirely new state. ed into smaller, more manageable clusters to improve
performance and lower query time.
Beacon Chain:
The beacon chain stores and manages the registry of
Deposit Contract:
validators, and will implement the Proof of Stake consen-
In order to register as a validator on the beacon chain, a
sus mechanism for Ethereum 2.0. The beacon chain will
user must generate new Ethereum 2.0 keys by depositing
be launched in the first phase of Ethereum 2.0, known as
ETH in the official deposit contract on the Eth2 Launch-
Phase 0.
pad hosted by the Ethereum Foundation and developed
ConsenSys Activate (coming soon).
eWASM:
Ethereum WebAssembly (eWASM) is a proposed redesign
of the Ethereum smart contract execution layer that uses Staking Provider:
a deterministic subset of WebAssembly, an open standard Service providers such as Staking-as-a-Service providers
instruction-set developed by a W3C (World Wide Web and/or Staking Pools that create, propose, or vote on
Consortium) community group. blocks added to the blockchain on behalf of token holders.

Staking Pool Custodial Provider:

Ethereum 2.0 will require a validator to deposit a min- Infrastructure providers, such as Staking-as-a-Service
imum of 32 ETH to be eligible to become a validator. providers, are non-custodial if they do not have control
Hopeful validators who do not possess 32 ETH to become over users funds. Custodial providers or solutions include
a validator will need to pool funds together with other the management and custody of a user’s private keys.
ETH holders for staking, similar to the concept of pool-
ing hashing power in mining pools. Thus, individuals can Staking Derivatives
stake smaller amounts of ETH by staking in a pool offered Staking derivatives are tokenized representations of un-
by third party providers or joining a trustless staking pool derlying staking positions that can be traded across token
(currently in research stage). holders.

Ethereum 2.0 Staking Ecosystem Report | A ConsenSys Insights Report 4

Introduction to
Ethereum 2.0
Today, Ethereum is the second largest blockchain process. However, actual participation of ‘average
by market cap, yet the most widely used by number validators’ is a necessity to drive decentralization
of transactions per day. Despite its broad usage in Ethereum 2.0 and contributes to the long-term
and rapid maturation over the past five years, the security of the network.
Ethereum network of today is a prototype for the
global world computer of tomorrow. This study has been structured to identify the
different types of validators on Eth2 and their
The long-anticipated launch of Ethereum 2.0 (Eth2) behaviors, needs, and desires — as well as
presents a critical ecosystem milestone. This new presenting solutions to identified pain-points.
network architecture provides a novel opportunity
for a broad category of ETH holders to create a
continuous revenue-generating capability for
providing public infrastructure to the Ethereum
community.

Decentralization has always been a fundamental

design goal of Ethereum 2.0. By transitioning to
Proof of Stake, Eth2 will enable a typical consumer-
grade laptop or small hosted virtual private server
(VPS) to participate in the Ethereum consensus

This new network architecture provides a novel

opportunity for a broad category of ETH holders
to create a continuous revenue-generating
capability for providing public infrastructure to
the Ethereum community.

Ethereum 2.0 Staking Ecosystem Report | A ConsenSys Insights Report 5

 Understanding Ethereum 2.0
Ethereum 2.0 is an upgrade from Ethereum 1.0’s Each shard chain will relay information to the
current Proof of Work consensus model to Proof of beacon chain and will be enabled by a dedicated
Stake (PoS), which allows for improved scalability, virtual machine and execution environment called
throughput, and security of the public mainnet. eWASM.
It includes a variety of new features aimed to
address the “Scalability Trilemma,” a concept in Ethereum 2.0 is a pure Proof of Stake system, on
distributed system architecture that currently which participating validators are required to
prevents blockchains from achieving the scalability stake their ether in addition to providing compute
required for mass adoption. For Ethereum and many resources to secure the network by proposing and
other blockchains today, the scalability trilemma attesting blocks. In return for their contributions,
is the result of consensus designs that require validators will earn periodic payouts if they follow
every node to verify and execute every transaction. the rules of the protocol. Alternatively, validators
This consecutive verification renders the network will be penalized if they act maliciously or are
unable to process more transactions than any single offline.
network node is capable of, limiting the scalability
potential of the whole (particularly as the data Reward rates, expected to range from 2.7%–
burden grows over time). 20%1, are driven by a number of exogenous and
endogenous factors including: validator behavior,
To combat the scalability trilemma, Eth2 will the total amount of ETH staked on the network, and
implement a “sharded” protocol design. Sharding the average uptime of all active network validators.
is a form of database partitioning, also known as
horizontal partitioning, where large databases are There are two ways for ETH holders to participate
divided into smaller, more manageable clusters and earn staking rewards on Ethereum 2.0. ETH
to improve performance and lower query time. holders can run their own validator(s) by staking 32
Sharding is not new to distributed systems; the ETH increments into the official deposit contract.
concept has been around in traditional centralized Alternatively, ETH holders who do not wish to
database management since the late ‘90s. run their own infrastructure may stake through a
staking provider and/or join a staking pool.
Shards in the context of Eth2 can be understood as
64 independent blockchains that operate in sync
with the existing Eth1 chain. Shards communicate
and coordinate network state and transactions via
the root chain, which is called the beacon chain.

1
Expected reward range between 30M to 524,288 total ETH staked in the network.

Ethereum 2.0 Staking Ecosystem Report | A ConsenSys Insights Report 6

What is Phase 0?
Ethereum 2.0 is planned to roll out in three phases: Phase 0, 1, and 2. Phase 0 is scheduled to launch in Q3
2020 with upgrades to Phase 1 and 2 released in the coming years.

Figure 1: The Phases of Ethereum 2.0.

During Phase 0, the beacon chain will be 524,288 ETH (genesis/32) must be reached. Until
implemented. The beacon chain stores and manages this security threshold is reached, rewards are not
the registry of validators, and will implement the issued to those that deposit ETH, which means a
Proof of Stake consensus mechanism for Ethereum degree of altruism and trust is required socially
2.0, but does not yet include sharding or the between validators since it cannot be enforced
capability to process transactions, other than cryptographically. Once the genesis threshold is
some validator operations. Phase 0 can be thought reached, all validators will be rewarded for their
of as the “heart” of this new system and requires contribution.
the heaviest technical and coordination lift to
implement. The original Ethereum PoW chain will For more information regarding Ethereum 2.0,
remain fully functional and will continue to run the beacon chain, and Phase 0, please consult the
alongside the new Ethereum PoS chain through ConsenSys Ethereum 2.0 Knowledge Base.
Phase 1 to ensure data continuity.

In order to launch the Ethereum 2.0 network, the

minimum genesis threshold of 16,384 validators or

Ethereum 2.0 Staking Ecosystem Report | A ConsenSys Insights Report 7

Research Objectives
and Methodology
Ethereum 2.0 has been designed to scale to thousands of independent network participants, each with an
active stake in maintaining the network. As such, understanding the expectations, needs, and pain-points of
those planning to stake on Ethereum 2.0 (or not) is of paramount importance to the broader ecosystem and
its enablers.

The key objectives of this research include:

• Understand ETH token holder profiles and behaviors

• Determine pain-points and hurdles to adoption
• Identify market opportunities and enablers

Methodology
Prior to designing the research, our team identified already own ETH. This study aimed to capture the
and conducted various qualitative stakeholder behaviors and views of people who intend to stake
interviews aiming to further understand our their ETH as well as those who do not.
questions and assumptions about the Ethereum
2.0 staking ecosystem. With preliminary research The survey was initiated in February 2020, and
findings and fundamental research objectives remained live for 20 days. 287 completed responses
in mind, our team deployed a quantitative user were logged in that period. User anonymity was
research study to capture the broad user segments, protected and no identifying information about
sentiments, and behavioral patterns to drive the respondents was collected. Data was analyzed and
industry’s collective understanding of Ethereum 2.0 responses compared by segment, resulting in the
stakers. findings detailed in this report. The original survey
questions can be found in the following link.
Georgia Rakusen, Lead User Researcher at
ConsenSys Codefi, designed and conducted the
survey, which was distributed online through crypto
and blockchain communication channels including
Twitter, Reddit, Discord, Telegram, LinkedIn, and
email groups, seeking a wide audience of users who

Ethereum 2.0 Staking Ecosystem Report | A ConsenSys Insights Report 8

Macro Research
Findings
Summary
The research study categorized existing ETH holders into distinctive user segments based on their
participation preferences for Eth2 Staking. This approach allowed us to identify common and diverging goals,
needs, and characteristics to provide concrete evidence on the archetype of existing ETH holders in relation
to the Ethereum 2.0 staking ecosystem. The identified user segments included:

1) Participants who plan to run their own validator node(s).

2) Participants who plan to use a third party staking provider.
3) Participants who are undecided.
4) Participants who do not plan to stake.

Staking Preferences
Out of all 287 responses, ~33% intend to run their
own validator node(s), ~33% intend to use a third
party staking service, ~17% are undecided and
~3% do not intend to stake. In addition, ~17% of
responses only partially completed the survey,
but indicated wishing to run their own validator
node(s)2.

Among the respondents who intend to run their

own validator nodes, when asked about using a Figure 2: Staking preferences of the 287 survey respondents.

staking service provider, ~20% said they would

be interested in using a staking service instead of
running their own nodes.

For the 17% who are undecided about how or

whether to stake their ETH, ~35% would be likely to
use a third party staking service if made available.

2
Partial responses were excluded from further analysis for the purpose of this report.

Ethereum 2.0 Staking Ecosystem Report | A ConsenSys Insights Report 9

Portfolio Composition
All respondents of the survey are existing ETH holders. ~56% of all respondents also hold Bitcoin (BTC), ~84%
hold stablecoins, and ~20% hold other layer 1 and layer 2 stackable assets including Tezos, Loom, and Matic.

Figure 3: Crypto-asset ownership vs. staking preferences.

Ethereum 2.0 Staking Ecosystem Report | A ConsenSys Insights Report 10

Ether Holdings
The majority of respondents, 63.2%, hold 32 ETH
or more, with 22.5% holding less than 32 ETH.
The majority of those who
The remaining respondents did not disclose their do not intend to stake
amounts. Those who intend to run their own
validator node(s) generally hold larger amounts of
hold less than 32 ETH.
ETH and are also less likely to disclose the amounts
they hold. The majority of those who do not intend
to stake hold less than 32 ETH.

Figure 4: Reported ETH ownership vs. staking preferences.

Ethereum 2.0 Staking Ecosystem Report | A ConsenSys Insights Report 11

Portfolio Management
Approximately 46% of respondents currently manage the majority of their ETH
holdings in hardware wallets. This is particularly true for those who intend to run
their own validator node(s). However, almost a third (30.2%) of the participants
planning to stake their ETH with a staking provider currently hold the majority of
their holdings on a centralized exchange, such as Coinbase or Binance.

Figure 5: ETH portfolio management vs. staking preferences.

Ethereum 2.0 Staking Ecosystem Report | A ConsenSys Insights Report 12

Understanding of Eth2 Economics
The majority of respondents, 54.7%, indicated they had a general to sound
understanding of Eth2 staking rewards, although only 15.8% across all
respondents reported a sound understanding. Those who intend to run their own
validator node(s) self-reported to be the most knowledgeable, while those who
are undecided or do not intend to stake were the least knowledgeable about the
anticipated rewards of participation.

Figure 6: Self-reported understanding of Eth2 economics vs. staking preferences.

Ethereum 2.0 Staking Ecosystem Report | A ConsenSys Insights Report 13

Detailed Research
Findings
Respondents Who Plan to Run Their Own Validators
Respondents who plan to run their own Ethereum 2.0 validator node(s) tended to share the
following characteristics, offering a snapshot of the typical user profile:

The survey posed the following questions to the ~33% of respondents who indicated they plan to run their
own validator.

When Do You Plan to Participate?

Almost two thirds of respondents

who intend to run their own validator
node(s) indicated their preference to
participate during the initial go-live
phase (i.e. Phase 0). In addition, ~17%
plan to participate in a subsequent
Eth2 phase, while ~19% were
undecided.

Figure 7: Timing of participation among those planning to run their own validator node(s).

Ethereum 2.0 Staking Ecosystem Report | A ConsenSys Insights Report 14

How Much Do You Intend to Stake?

Respondents who plan to run their

own validator indicated an intent to
stake ~51.5% of their existing ETH
holdings on average, excluding those
who preferred not to disclose.

Figure 8: % of total ETH portfolio to be staked among those

planning to run their own validator node(s).

How Many Beacon Nodes Are You Planning to Run?

The majority of respondents (~66%)
plan to run up to five validator nodes
or fewer. 34% of respondents plan to
run just 1 node, while 27% plan to run
more than 5 nodes. The remaining
~7% preferred not to disclose the
number of nodes they plan to run.

Figure 9: Number of nodes to be run by respondents

planning to run their own validator node(s).

Ethereum 2.0 Staking Ecosystem Report | A ConsenSys Insights Report 15

What % of ETH Rewards Will Make Running Your Own Validator Node(s) Worthwhile?
We asked participants who plan to run their own validator node(s) what percentage in ETH rewards would
make it worth for them to do so. For people who will run their own node(s), half are hoping for 5–10% returns
[average 5.8%] in order for it to be worthwhile.

Based on the estimated network rewards for a single validator from 524,288 (genesis) to 5MM ETH staked
(20% - 6.7%), these would-be validators should feel incentivized enough to participate.

Figure 10: Anticipated reward (as % of staked ETH) by respondents planning to run their own validator node(s).

Ethereum 2.0 Staking Ecosystem Report | A ConsenSys Insights Report 16

Which Node Management Features Do You Care About Most?
We asked respondents who plan to run their own validator node(s) which node management features they
cared about most. While respondents showed a preference for slashing protection, validators also indicated
an interest in enhanced performance monitoring and portfolio management tools.

Figure 11: Preferred node management features among respondents who plan to run their own validator node(s).

Ethereum 2.0 Staking Ecosystem Report | A ConsenSys Insights Report 17

What Is Your Interest in Staking With a Third Party Provider?

We asked respondents who plan to run their own validator node(s) about their likelihood of staking
with a third party provider instead of running their own validator node(s). Approximately 20% of
respondents indicated that they would be interested in using a third party staking service provider
instead of running their own nodes, with ~37% unsure.

Figure 12: % of respondents planning to run their own validator node(s) who would consider using a third party staking provider instead.

Ethereum 2.0 Staking Ecosystem Report | A ConsenSys Insights Report 18

Respondents Who Plan to Use a Third Party Provider
Among the 19.8% of respondents who indicated that they are “likely” or “very likely” to use a third
party staking provider, we observed the following trends:

The survey posed the following questions to these respondents who indicated they plan to use a third party
provider.

Which Staking Provider Features Do You Care About Most?

We asked respondents
who plan to stake with a
provider which features
they cared about most.
Respondents showed the
most preference for a feature
that compounds earned
interest (55.20%), followed
by a dashboard to monitor
the performance of deposits
(47.10%). Respondents
also respectfully noted
slashing protection and
non-custodial services as
desirable features.

Figure 13: Preferred staking service features among respondents who plan to use a third party provider.

Ethereum 2.0 Staking Ecosystem Report | A ConsenSys Insights Report 19

What Proportion of Your ETH Holding Do You Intend to Stake?

Figure 14: % of total ETH portfolio to be staked among respondents who plan to use a third party provider.

Respondents who plan to use a third

party indicated an intent to stake
50% of their existing ETH holdings
on average, excluding those who
preferred not to disclose.

Ethereum 2.0 Staking Ecosystem Report | A ConsenSys Insights Report 20

What Is a Worthwhile Net Reward Rate from Using a Staking Service?

The average worthwhile reward rate for respondents planning to stake with a provider was 7.6%. This average
is higher than those planning to be their own validator, suggesting increased performance may be required of
third party providers.

Figure 15: The worthwhile reward rate of respondents planning to use a third party staking provider.

What is a Good Price for a Staking Service?

We used the Van Westendorp Price

Sensitivity Indicator3 to establish
what ETH holders planning to stake
with a third party provider might be
willing to pay for a staking service.
The sweet spot for pricing a staking
service would be between 3.6–9.4%
of earned rewards.

Figure 16: A trend curve of opinions towards staking service fees (as
%) among those who plan to use a third party staking provider.

3
Van Westendorp Price Sensitivity Meter method (https://www.5circles.com/van-westendorp-pricing-the-price-sensitivity-meter/)

Ethereum 2.0 Staking Ecosystem Report | A ConsenSys Insights Report 21

Respondents Who Are Undecided About Staking
Among the 14.6% of respondents who indicated that they are “undecided” about staking in Ethereum 2.0, we
observed the following trends:

The following questions were posed to respondents who indicated they are undecided about staking.

Why Are You Undecided About Staking?

The primary reason why respondents were undecided about staking is that they want to wait and see
if Ethereum 2.0 works before they put their ETH at risk. The inability to withdraw deposited ETH was
respondents’ second-most listed factor for being undecided.

Figure 17: Reasons for uncertainty among respondents who are undecided about whether to stake ETH on Ethereum 2.0.

Ethereum 2.0 Staking Ecosystem Report | A ConsenSys Insights Report 22

What Percentage of ETH Rewards Would Make Staking Worth It?
Respondents who were undecided about staking indicated that staking would be worthwhile if it returned
on average 9.4% rewards, which is 2.8% higher anticipated returns than those who intend to be their own
validator.

Figure 18: The % of ETH rewards that would make staking worthwhile among respondents
who are undecided about whether to stake ETH on Ethereum 2.0.

Ethereum 2.0 Staking Ecosystem Report | A ConsenSys Insights Report 23

How Likely Are You to Stake With a Third Party Provider?

Just over 35% of respondents indicated that they are “likely” to use a third party provider if they decide to
stake, while over half of the respondents were unsure.

Figure 19: The likelihood of using a third party provider among respondents who are currently undecided
about whether to stake ETH on Ethereum 2.0, should they eventually plan to stake.

Ethereum 2.0 Staking Ecosystem Report | A ConsenSys Insights Report 24

Which Management and Staking Provider Features Do You Care About Most?

Respondents indicated that non-custodial staking services and slashing protection was most important to
them. Enhanced performance monitoring, ability to deposit any amount of ETH, and a record of rewards for
tax reporting purposes were other commonly preferred features.

Figure 20: Node management and staking feature preferences among respondents who are currently
undecided about whether to stake ETH on Ethereum 2.0, should they eventually plan to stake.

Ethereum 2.0 Staking Ecosystem Report | A ConsenSys Insights Report 25

Respondents Who Do Not Plan to Stake4
Among the 2.8% of respondents who indicated that they do not plan to stake, we observed the
following commonalities:

The survey posed the following questions to these respondents who indicated they plan to use a third party
provider.

Why Do You Not Plan on Staking?

The majority of respondents,
71%, indicated that their
primary reason for not
staking ETH is that they have
insufficient amounts of ether
to participate. Similar to
those who were undecided
about staking, a large portion
of respondents cited that
they wanted to take a wait-
and-see approach before
they consider staking their
own ETH.

Figure 21: Reasons for not staking ETH on Ethereum 2.0 among respondents who do not plan to stake.

4
There is less confidence in these findings due to the limited number of responses that made up this data set. This segment should be used as an indicator
only.

Ethereum 2.0 Staking Ecosystem Report | A ConsenSys Insights Report 26

How Likely Is It That You Will Use a Third Party Provider?

Respondents indicated that non-custodial staking services and slashing protection was most important to
them. Enhanced performance monitoring, ability to deposit any amount of ETH, and a record of rewards for
tax reporting purposes were other commonly preferred features.

Figure 22: The likelihood of using a third party provider among respondents who do not plan to stake.

Ethereum 2.0 Staking Ecosystem Report | A ConsenSys Insights Report 27

Third Party Staking Providers
With the introduction and implementation of Proof of Stake, the blockchain industry has seen a large
wave of freshly created infrastructure form to faciilitate staking on the behalf of others. As a result, all
respondents were presented with questions about the use of third party staking providers.

Preferred Features
While different segments of staking participants require different features of a staking service,
slashing protection, performance monitoring tools, and the ability to compound staking rewards
were commonly mentioned features across respondents. Offering non-custodial staking services was
also one of the more important features listed by all respondents.

Figure 23: Preferred features of staking providers among respondents.

Ethereum 2.0 Staking Ecosystem Report | A ConsenSys Insights Report 28

Payment Preference

The majority of
respondents would prefer
a staking service fee
model where deductions
are taken from the
rewards they earn. This is
particularly true for those
who plan to stake with a
third party.

Figure 24: Respondents’ preferred staking service fee model.

Pricing
For respondents who
intend to run their own
validator node(s), the
optimal range for pricing
a staking service would
be between 3.9–11.7% of
their earned rewards.
For people who intend
to use a staking service,
the range is slightly
lower: between 3.6–9.4%.
For people who are
undecided, it’s lower still:
2.8–7.2%.

Figure 25: Respondents’ required reward % when using a third party provider.

Ethereum 2.0 Staking Ecosystem Report | A ConsenSys Insights Report 29

We used the Van Westendorp Price Sensitivity Indicator to establish what people might be willing
to pay for a staking service. The optimal range for pricing, averaged across all segments, is between
3.59–9.84% of earned rewards.

The optimal range for pricing,

averaged across all segments, is
between 3.59–9.84% of earned
rewards.

Figure 26: The % of their staking rewards that respondents are willing to pay for a staking service.

Ethereum 2.0 Staking Ecosystem Report | A ConsenSys Insights Report 30

Known Providers
Providers such as Coinbase, Binance, and Prysmatic Labs saw the highest reported awareness levels amongst
respondents, with 90.2%, 87.1% and 73.6% of respondents indicating they knew of the providers. Other
providers were less known among most respondents.

Figure 27: Recognized third party staking services among respondents.

Ethereum 2.0 Staking Ecosystem Report | A ConsenSys Insights Report 31

Trust
While providers such as Coinbase, Prysmatic Labs, and Binance saw the highest aggregate reported trust
levels respectively, there was a 44.8% discrepancy between these providers and the associated trust
respondents indicated on average, with Binance showing a divergence of 66.8% of respondents knowing but
not trusting them. Trust in third parties is lower for people who intend to run their own node(s), with ~25%
saying they would not trust any of the listed companies. For people who are undecided, their trust level is
generally lower than those who already intend to use a staking service.

Figure 28: Extent to which respondents trust third party staking services.

Ethereum 2.0 Staking Ecosystem Report | A ConsenSys Insights Report 32

Discussion and
Recommendations
In order to benefit the broader Ethereum 2.0 staking ecosystem, this study has sought to identify key themes
that drive the decision-making process of participants who are considering staking ETH. Based on our findings,
we have arrived at strategic and tactical recommendations for those who are building or otherwise seeking to
increase the adoption of Eth2.

Incentives about the performance, security, and relevant

incentive mechanisms is necessary to improve long-
The incentives for direct or indirect participation
term adoption.
in Eth2 staking are a critical aspect of the decision-
making process for ETH holders, particularly when
Fewer than 35% of all respondents indicated a
comparing the different participation approaches
sound knowledge of Eth2 staking rewards and
available to them.
economics. Those who are undecided or who
do not intend to stake their ETH are the least
Some users who intend to run their own validator(s)
knowledgeable about potential rewards.
would do so altruistically, without any expected
returns. On average, though, respondents expected
Recognizing the importance of educating ETH
an average of 5–10% returns for their efforts.
holders about the economics and returns of Eth2
On average, those who intend to run their own
participation, ConsenSys has begun providing the
validator node(s) would require higher rewards from
ecosystem with tools including an open-source
a staking service to convince them to use a third
calculator and educational resources for helping
party instead of just running their own node(s).
ETH holders understand the fundamentals and
benefits of staking.
Sound understanding of anticipated and projected
rewards is paramount to drive better, more
Obligations of Eth2 stakers are not exclusively
informed decision-making among existing ETH
economic, but may require technical knowledge
holders.
and awareness of operative responsibilities and
risks––particularly for those planning on running
Education their own validator node(s). Coherent, consistent,
For any revolutionary technology, the learning and concise documentation is therefore required
curve for becoming an active participant in the Eth2 to educate existing ETH holders on the process,
ecosystem is steep, due to its inherent systematic available options, risks, and inherent responsibilities
and economic complexity. Educating ETH holders for staking their ETH.

Ethereum 2.0 Staking Ecosystem Report | A ConsenSys Insights Report 33

Trust Accessibility
Trust and confidence in provided infrastructure The Eth2 protocol specifications require users to
is a core value proposition that protocol builders, deposit a minimum of 32 ETH to become a validator.
client teams, and staking providers need to signal to The majority of respondents who do not plan to
existing ETH holders to drive better adoption and stake on Eth2 indicated the primary reason for this
conversion for participation in Eth2 staking. is that they have insufficient amounts to run their
own validator nodes.
The majority of respondents who are either
undecided or who initially do not intend to stake For ETH holders with less than 32 ETH, pooling
indicate they are taking a wait-and-see approach funds offers a pathway to participation. Raising
to ensure the protocol is functional and reliable awareness of potential options and trade-offs
before depositing their ETH. Publicizing code audits to stake less than 32 ETH through a third party
and testnet results is a critical step to promote provider such as Rocketpool or decentralized,
confidence among current ETH holders. trustless pools, which are currently in the research
phase, is a potential pathway to participation for
Comparing respondents’ indication of companies ETH holders of this category.
known to them to their associated trust levels
reveals a trust gap among third party providers.
Companies that are building Eth2 staking products
and services should be dedicated to users’ needs,
offer transparency, and build products that make
users feel confident. Examples of these referenced
by respondents include the publication of relevant
architecture, audits, servers, staff, and experience,
as well as offering non-custodial services that allow
stakers to remain in control of their deposits.

“[Participating in Eth2 is] going to scare

me to death, but I have to hope the EF
will have done a better job than anyone
else to formally vet the contracts.”

Ethereum 2.0 Staking Ecosystem Report | A ConsenSys Insights Report 34

 “Something to help me understand that
third-party staking is going to benefit the
community as a whole and not cause a
security problem.”

Security Considerations
The promise of earning staking rewards in exchange Eth2 staking on behalf of their clients, and may
for active participation in the Eth2 protocol is have sufficient economies and alternative revenue
an attractive one, however not all ETH holders streams to be able to provide these at lower rates to
necessarily have the desire or technical ability to compete for larger market shares.
operate validator node(s) themselves. The relatively
high proportion of respondents who have indicated While these stakeholders are uniquely positioned
their interest in using a third party provider to to drive adoption and staking participation rates,
stake on Eth2 reveals the existing demand, market there are potential risks to the security-impeding
opportunity, and anticipated role third party centralization they would introduce. Considering
providers will play in driving broader retail and that infrastructure providers typically operate
institutional Eth2 staking adoption. the same infrastructure for multiple clients raises
potential concerns over coordinated and/or
Managed service and staking providers that provide simultaneous downtime.
staking infrastructure as a fundamental part of their
business model and have established reputation and
trust amongst users are well-positioned to offer
their services to existing ETH holders. Moreover,
exchanges and custodians with existing users
accounts such as Binance and Coinbase are well
positioned to extend existing business lines to offer

Ethereum 2.0 Staking Ecosystem Report | A ConsenSys Insights Report 35

Value-added Features
Monitoring and analytical tools are critical features that improve operative and allocative efficiency among
staking participants.

“It needs to be so user friendly (...) if you

want more people to use Ethereum, it needs
better client software.”

Desirable features can broadly be organized into two categories, which are detailed with relevant
recommended feature sets below:

Monitoring and analytical tools for hardware and node functions:

• Confirmation that my node is up and running and validating as expected.
• Monitoring of uptime, performance, and latency.
• Insight of relative performance within the network (stake effectiveness).
• Alerts if validator is reorganized, offline, or experiencing response time issues.

Monitoring of the network and portfolio rewards:

• Monitoring of staker deposit, real-time, and historical reward accrual.
• Reporting of year to date earnings for accounting and taxation purposes.
• Overview of network performance, current, and historic stake rates.

In addition, offering tools to mitigate operational and potential exposure risks, such as slashing protection
and deposit insurance, were commonly noted by respondents.

“I Just want assurances. I want actual Nexus

or Opyn insurance and the most confident
assurances my ETH is safe.”

Ethereum 2.0 Staking Ecosystem Report | A ConsenSys Insights Report 36

 “I’m very concerned about the length of time
eth 1 will be tied up, if there’s going to be a
two-way bridge? Will there be a secondary
market for people to be able to trade? It might
be important to me, maybe I just feel agora-
phobic of not having an escape. It’s not a go/
no go decision for me but it’ll influence how
many nodes I decide to run.”

Liquidity
The inability to withdraw deposited ETH for an While some industry stakeholders including
undefined timeframe is a clear hurdle to users ConsenSys are currently working on approaches
who would potentially participate in Phase 0, and to address this problem in an Eth2 context, a
influenced the amount of ETH they would initially standardized solution and implementation design
stake. The inability to withdraw was the second is recommended to address the value divisibility,
most listed factor (43% of respondents) for those collateral-to-liquidity ratio, and inter-validator
who were undecided about staking. (risk) fungibility trilemma holistically amongst
participants.
One way to catalyze retail and institutional
participation in Ethereum 2.0 staking would be to
create tradable staking derivatives on underlying
staking positions that mitigate the perceived
financial risk to participants. There are complex
design considerations when evaluating the existing
value divisibility, collateral-to-liquidity ratio, and
inter-validator (risk) fungibility trilemma. Industry
initiatives such as the Liquid Staking Working Group
are beginning to assess possible implementation
designs across other protocols.

Ethereum 2.0 Staking Ecosystem Report | A ConsenSys Insights Report 37

Conclusion
A few months ago when we began designing our research study, we realized that
there was a communication gap between the builders and the enablers of the Eth2
community. A gap we felt well suited to fill. The tricky part was producing a data set that
could inform both builders and enablers, while educating the end user. There are a lot of
pressing questions to consider in the future of validator research and analysis, but we
hope this serves as a foundation for other teams.

With Phase 0 on the horizon, client teams and product builders must design and
implement features that encourage the broadest possible participation across the
universe of future validators. The largest takeaways from this journey is the importance
of anticipated and projected rewards to drive better, more informed decision-making
abilities among existing ETH holders. In addition, coherent, consistent, and concise
documentation is required to educate existing ETH holders on the process, available
options, risks, and inherent responsibilities for staking their ETH.

We are excited to see how the validator landscape and options evolve once Eth2
launches. Today, the innovation we have witnessed in the space is remarkable. While
Eth2 staking through centralized exchanges offers a lower barrier to entry and may offer
better rewards than running infrastructure by oneself, does it increase centralization
risk for the world’s most used blockchain?

Eth2 will not build itself, so thank you to everyone participating in this milestone and we
hope that you find our work insightful and helpful! We look forward to contributing to
future analyses and fostering productive dialogue among the many stakeholders behind
the exciting launch of Ethereum 2.0.

Visit ConsenSys Codefi for more information.

Ethereum 2.0 Staking Ecosystem Report | A ConsenSys Insights Report 38

Authors
Mara Schmiedt
GLOBAL STRATEGY LEAD AT CONSENSYS CODEFI

Mara is a Strategy Manager at ConsenSys, where she leads global strategy, discovery, and delivery
of new blockchain ventures, products, and platforms that facilitate the adoption and participation in
open-source economies and decentralized finance. Her role entails supporting protocol teams with the
launch, redesign, and ongoing participation in their respective networks by leveraging her background
in applied economics and knowledge in market, mechanism, and game theoretic design.

Mara has broad experience in bringing blockchain-based products and ventures in the financial
services, supply chain and retail sector to market. Prior to ConsenSys she worked as a Management
Consultant at PwC, focused on developing the operative blueprints for the implementation of
technological innovation in financial processes and evangelising the adoption of Ethereum in the
German market.

Georgia Rakusen
USER RESEARCH LEAD AT CONSENSYS CODEFI

Georgia is a seasoned user and design researcher, working to help ConsenSys products and blockchain
organizations within the ecosystem understand their users and help them build genuinely useful and
delightful experiences. At ConsenSys Georgia delivers high value strategic insights to our range of
product teams building for developers, institutions, and general consumers, such as ConsenSys Codefi.
In addition to running research for product teams globally, she also leads the ConsenSys research
coaching program, and spends much of her time evangelizing for the voice of the customer in the web
3 space.

Georgia has an extremely broad background across a number of both scaled and start-up technology
companies including Europe’s leading usability testing company, and products in ecommerce,
government services, finance, travel, publishing, gaming, and B2B.

Collin Myers
GLOBAL DEFI STRATEGY AT CONSENSYS CODEFI

Collin leads a project in CodeFi called Activate, which is focused on launching decentralized networks
and increasing participation. In addition to Collin’s work on Activate, he is actively involved with the
adoption, economics, and education of Eth2. Prior to ConsenSys Collin worked at MUFG, primarily
focused on corporate debt in a variety of industry verticals.

Ethereum 2.0 Staking Ecosystem Report | A ConsenSys Insights Report 39

Ethereum 2.0 Staking Ecosystem Report | A ConsenSys Insights Report