Grayscale invested $150 million in ether. This happened after the introduction of staking options to the company’s ETP products. Is this a breakthrough for Ethereum?
Grayscale invests in ETH
The asset management company purchased 32,000 ETH worth $150 million. This comes shortly after Grayscale launched a staking option for Ethereum ETPs, becoming the first U.S. cryptocurrency fund issuer to offer staking-based passive income. Grayscale and its shareholders can start generating passive income through the rewards paid in exchange for staking. These awards are treated as “fund assets”.
After deducting sponsorship and deposit fees, fund shareholders will earn up to 77% of the total rewards generated from Grayscale’s Ethereum Trust staking and approximately 94% from Ethereum Mini Trust staking.
At least two more funds are expected to add staking to their ETFs. This is a product of 21Shares (the probable start date of the service is October 23) and BlackRock (October 30). However, it is worth adding that the ongoing government shutdown may slow down the actions of regulatory authorities.
Staking, what is it?
What is cryptocurrency staking? It is a process of “freezing” a specific amount of cryptocurrency in a wallet or on a special platform to support the functioning of the blockchain network. In return, the participant receives rewards in the form of additional tokens. It can be compared to a bank deposit, where the user gives his funds for a certain period of time and receives interest in return – with the difference that in staking the funds are not used by the bank, but by the blockchain network itself to ensure its security and stability.
The basis of staking is the Proof of Stake (PoS) consensus mechanism. Unlike the older Proof of Work (PoW) system, which requires a lot of computing power to “mine” blocks, PoS involves selecting the so-called validators from among users who have blocked their coins. The greater the number of tokens in staking, the greater the chance of selecting a given user as a validator of a new block. When a validator successfully validates a transaction, it receives compensation in the form of new tokens or network fees.
