As is widely known, the Ethereum blockchain currently uses an energy-intensive process for mining and disbursing new tokens like Bitcoin. This model is known as the proof-of-work consensus. In early 2022, the network is expected to discontinue this paradigm and make a fundamental shift to proof-of-stake (PoS) consensus.
However, to make that leap Ethereum needs the help of its community members, who would lock a specific amount of their holdings to make the network secure, and earn rewards in return. This process is known as staking. It is also the main mechanism behind the PoS model.
By agreeing to contribute a minimum required amount of Ether (32 ETH at present), contributors on Ethereum become “validators”. These validators are tasked with processing transactions, storing data, and adding blocks to the network. In return, they get a share of newly minted coins just like crypto miners, only this yield is more sustainable.
Carbon emissions from crypto mining is a topical issue that has caught the attention of environmentalists and regulators worldwide. Staking aims to change that by fundamentally revising the rewards system on a network.
It’s worth noting that staking on Ethereum is unlike other cryptocurrencies. Investor holdings are locked on the network until a milestone -- in this case ETH 2.0 transition -- is reached. Although there’s no fixed timeline, most reports suggest that Ethereum would undergo the upgrade in early 2022.
Nansen’s data reveals that half of the depositors -- nearly 3.35 million -- in ETH staking are presently unknown. Of the known sources, the largest amount of staked Ether (820,544) is concentrated in Kraken. The second-largest (762,272 ETH ) amount is deposited in staking solutions provider Lido Finance, followed by Binance which holds 588,608 ETH.
Additionally, almost 42% of depositors purchased their Ethereum tokens from unknown sources. The remainder resorted to Kraken, Binance, Coinbase, Bithumb, and Uniswap among others.