Jun 2, 2023 - Economy
Staking on Ethereum had its biggest month to date
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Staking ether in order to secure the second largest blockchain (and earn yield) had its best month ever in May.
Why it matters: This result makes it clear that the world wanted to invest more in ether, but the fact that investors couldn't withdraw those investments at will was holding them back.
How it works: The Ethereum blockchain's validators have to post ethers (ETH).
- Investors can delegate their assets to a validator to do the actual work that earns these returns, but run the risk of the validator screwing up and getting some of their assets slashed (though this seldom happens).
Catch up fast: Ethereum upgraded in April so that entities who had committed ETH to securing the network could actually withdraw it.
- The big question following that upgrade: would withdrawals outpace deposits or vice versa. We now seem to have something of an answer.
Be smart: The SEC had somewhat taken its eyes off Ethereum until it switched from proof-of-work to proof-of-stake.
- SEC chair Gary Gensler said that staking might make ETH a security.
- Then Kraken shut down its staking services in the U.S. under SEC pressure.
- Coinbase, the largest exchange here, has also been threatened with a lawsuit from the regulator over staking, but it's vowing to take the matter to court.
