Coinbase Prime is adding ethereum to its growing list of staking options for institutional clients in the U.S., Coinbase announced in a blog post on Monday. The product offers another avenue for financial institutions looking to enter the crypto space but not sure how.
Another option for institutions
Coinbase’s new offering provides another crypto entry into the space for institutions that have been following the burgeoning crypto industry. The option of staking and generating yield could be of interest to larger companies looking to deposit funds and accrue interest. In addition to Ethereum, Coinbase Prime will also offer staking tokens for other blockchains such as Polkadot, Solana, Cosmos, Tezos and Celo.
Interested clients will be able to create a wallet, decide how much they wish to stake, and pass their Coinbase Assets page on their Coinbase Prime account. Coinbase The withdrawal key will be stored in the company’s cold storage vault, and the pledge transaction can only be executed after reaching a consensus.
Trouble with Staking
Staking provides passive income for assets that are already in custody by allowing them to provide valuable work to the blockchain in a secure form. Ethereum rewards stakers who act in the network’s best interests and punishes those who take action against the network or fail to secure the network for any reason. This makes staking with a reputable staking partner crucial, which helps maximise returns while minimising risk.
Pledged assets can be likened to earning compound interest. However, when dividends are reinvested, this is different from traditional markets. Staking rewards are paid in tokens staked by users, which users will be able to reinvest for higher returns. The staked tokens are also typically stored in their respective wallets, allowing users to earn yields without re-staking.
Ethereum Moves To Proof Of Stake
As the Ethereum blockchain transitions to a proof-of-stake consensus algorithm, validators holding ETH will replace miners to run and secure the Ethereum network. Therefore, staking will play an important role in the future of blockchain, and the rewards obtained through staking may increase significantly. Coinbase had predicted at the beginning of the year that it expected ETH staking returns to reach 12% APR once the merger was completed. At the time of writing, data from StakingRewards shows that the average yield for staking pools is 4.08%.
Disclaimer: This article is for informational purposes only. It is not intended or intended to be used as legal, tax, investment, financial or other advice.