Coinbase Introduces Ethereum Staking for US Institutional Clients
Nicholas Otieno Aug 02, 2022 06:55
Coinbase rolls out a new staking crypto service to its institutional clients ahead of Ethereum’s planned transition to a proof-of-stake mechanism, providing more financial options to their portfolios.
Coinbase Prime – an integrated solution that offers secure custody, an advanced trading platform and prime services– has introduced an Ethereum staking service targeting corporate clients in the US.
Coinbase exchange described the addition of Ethereum to its staking options for US institutional investors as an important feature designed for financial institutions which want to enter the crypto money industry but hesitate about it.
The exchange said the staking service gives companies an opportunity to earn passive income by avoiding risks. The product offers yet another cryptocurrency on-ramp for institutions which have become interested in the industry's explosive growth but have not always known how to get in.
Generating yield through staking plays an important role to big firms that often are looking for attractive places to invest their money.
Coinbase Prime also offers staking services for Solana, Polkadot, Cosmos, Tezos, and Celo tokens, the exchange said in a blog post on Monday.
Aaron Schnarch, the Vice President of Product, Custody at Coinbase, talked about the development and said institutional customers can create a wallet, decide how much to stake and start staking ETH in their Coinbase Prime account.
According to the exchange, withdrawal keys are held in Coinbase’s cold storage custody vault, and the staking process happens through the validation of new cryptocurrency transactions on a proof-of-stake blockchain.
Coinbase has launched its staking services to take advantage of “the Merge,” the highly anticipated upgrade of the Ethereum network.
Staking Rewards
Staking allows customers to earn a yield on their cryptocurrencies by putting them in a pool of assets, which helps support the liquidity and operations of a blockchain ecosystem. Staking is often compared to a high-yield savings account where investors can earn more than 20% in annual yield on some platforms.
However, that practice does not come without risks. Staking normally requires customers to store their money with a third-party called a “custodian,” who technically owns the funds while they are being staked. Few months ago, investors experienced huge losses of funds when custodians such as Celsius Networks, Voyager Digital, among others, went bankrupt after crypto markets crashed.
In January this year, institutional crypto custody firm Anchorage Digital introduced Ether staking for institutions.
The San Francisco-based federally chartered crypto bank started providing ETH holders with the opportunity to earn rewards for their holdings.
Anchorage also planned to expand its Ethereum blockchain service once the network moves to a proof-of-stake (PoS) mechanism later this year.
“The Merge” – the upgrade that will shift the blockchain from a proof-of-work (PoW) consensus mechanism to Proof-of-Stake (PoS) alternative consensus mechanism – is expected to begin next month. The transition to PoS, which is intended to be faster and more energy efficient than PoW, is now anticipated to occur on September 19th.
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