Hildobby - Analyzing the Impact of ETF Staking

Transcript

Hello everyone. Uh hello everyone. So I'm going to talk about the impact of ETF staking on the whole staking landscape in general. Um as a quick recap first of all I've been uh working in this space on Dune analytics for over three years now. in uh 2022 um COVID happened and I went full autistic on Dune and made a bunch of charts. Uh and yeah, I don't know. That's that's how I started on here with this little face that's a dying NFT very very dead now and my pseudonym hill dubby. Um and I started at a time when uh I was quite quite surprised because

uh the beacon chain had gone live but there was no data to be found really on on you know how it was performing. I thought it could be quite important for, you know, Ethereum. Um, and I guess the interest really popped up after withdrawals went live. Um, but the reason this event is also really important to me is because in 2022 when I launched this dashboard, there's two teams that reached out to me and wanted to give me grants. Uh I was part of a quarter check funding round from East Taker and uh Lido also gave me a grant at the time and I don't think I'm not sure I would be here without uh these early sources of revenue. Um I'm now I'm doing great. I'm at Dragonfly since 3 years ago. Don't worry about it. But

yeah, uh that was uh a quick origin story on on how I got here and uh why I do what I do. Um I've been trying to tag uh entities staking. Um, now there's a it's a bit of a gray area in terms of like doxing, what's okay to do, what's not okay. Uh, I'm in the camp of it's okay to dox custodians who hold customers money. Uh, because it's also proof of funds and stuff like this. Um, I'm also okay with doxing very very large stakers, but I don't believe in doxing solo stakers. That's not really what I'm after at all. Um, and so far I've staked about 75%. They fluctuate over time. Uh, and it's also harder and harder to keep on tagging entities and

seeing, you know, who's actually controlling uh the who's actually securing the Ethereum protocol. Uh, but what you do see here is that um I have Coinbase tag at 6.4%. It's actually much higher now because they're they're harder to track. Uh I used to be able to track them quite well, but now they're all over the place. Um the reason I'm talking about Coinbase is because it's also the custodian between me for many of the ETFs. Um and therefore will come back being relevant uh here another thing. Oh yeah no before um talk about another thing um my tags have also been available on uh beacon chain. So if you if you see tags on there uh feel free to give feedback if you think they're wrong if things should be changed whatever. Um

obviously it's not a perfect data set. I'm trying to make keep it as maintained as possible. But yeah and if if if you want to remove text as well that's also completely fine. Please reach out. Uh I have no problem with that. Um I've also been tracking ETFs. Now you have been uh you you've seen many providers tracking reported flows but I don't actually want to uh look at that. What I'm doing is looking onchain and tracking the individual addresses and actually tracking what are the flows in and out of those addresses. Um now it's it's not easy because they're not necessarily students aren't necessarily willing to uh give out those addresses. So there's quite a bit of sleuththing involved. Um but I consider that work kind of fun I

guess. Uh and yeah um the reason I do it is uh I guess a little bit for fun but also because I believe that uh when ETF launched um they would naturally eventually have staking and more involved and onchain tracking would make this you know a clearer macro picture of what's going on rather than just looking at reported flows. Um so that's why I did all that. Um, so yeah, you can I've got I've got list of tags. I've got more over 10,000 addresses for all the ETFs that I'm tracking and keep on adding. You can query them. They're also useful for all kinds of onchain analytics and other purposes if you want to see on, you know, who's holding part of the supply of Bitcoin or Ethereum. Those are large

um players and therefore worth uh looking into. Uh but anyways, I digress. Um we're talking about ETF staking. Uh recently Gayscale announced that they haven't uh been allowed to to stake their ETFs. Um and that was on October 6th and they went right ahead on the same day and started to stake uh and they've been staking quite a bit of their ETH. Uh that is across Grayscale. Uh so that would be their product ETH E and Grayscale Mini which is the ticker ETH. It's a little confusing because the same as ETH I guess but whatever. And then 21 shares also has staked uh a bunch. Um now they you can actually see

that they when they staked on the validator queue uh because it caused the 20-day uh increase in terms of of Q time. Um so yeah they're you know large key ETH holders. So I guess to be expected um but this impact is going to be uh relevant going forward because they're not the only uh ETF issuer. They're not even the largest. Uh we got Black Rockck eventually coming at some point and probably going to have even a higher impact on the on the whole um staking landscape. Um now ETFs have redemption uh requirements so they need to keep some ETH on hand. You can't just take everything. Obviously you know

there's ad flows into ETFs and uh those are regulated products and therefore some needs to be kept. Um looking at their current stats, they're basically staking about 70% of their assets. Uh that's the initial amount they sent on October 6th to till 8th. Uh which is still actually uh no sorry it's not in the queue anymore. It should be staked now. Um but anyways, it took a while. 70% is staked. And I actually looked at uh that percentage and wanted to extrapolate to all the other issuers and seeing what would be the impact where the others to do the same. Uh, I'm not actually, you know, I I I've I've never really worked for the ACC or anything,

so I don't know if 70% is the right percentage and will apply to others. I don't know if there'll be more DGEN uh issuers or less DGEN issuers. Not sure, but let's just take it as is and say that it applies to the rest as a as a ballpark ballpark measurement. Um, so here you have the current ET uh ETF holdings for each of the issuers. uh only looking at the US for now because that's usually uh what people focus on it's the most relevant uh IT if issuers um multiplying about 70% uh to get you know if they followed in grayscale uh footsteps what would they stake um now you can see the impact on the deposit Q so about 76 days uh that would uh apply

I think the obviously the largest is going to be black rockck with the bulk of that uh weight as well the bulk of that percentage Um but you can see as well it trickles down to the rest. Um what is important that I mentioned before is uh that a lot of these are uh under Coinbase's custody and like I mentioned before Coinbase is currently already quite a large uh owner of state ETH. Uh in fact it is the largest single entity. Um and of course like I said it's it's they're really really hard to track. I I' I've been trying to keep tagging them uh estimating uh but yeah, they're not publishing it. They're not really

showcasing that. Uh there's an article that came out recently that uh said that they have about 11.4% of E states and there's a bunch more as well at uh that is parked at uh partnering protocols. Um but if you look back on uh this uh there's about 9.5% that would be staked uh with Coinbase which I consider quite large. And back when we knew that they had like 50% and up uh there was quite a bit of concern on uh in general about you don't you know we don't ever want someone to control too high of a stake.

uh they have seen reduced it, but adding that 9% on top would actually bring them back way over where they were when we were raided in the first place. So yeah, just something FYI, uh I think is interesting to watch out for. Um I love Coinbase, by the way. No beef against them. Just want to hold them accountable on this. Uh you know, I have a Coinbase account. Great, uh user experience. Um now the there's other uh it is who have announced their staking uh van which is much smaller. I believe it's 0.1% of would be staked ETH whether to stake um have gone for different routes they've gone for Lido. Um yeah I think that's great. Uh Lido is cool and I I

understand when you controlling a smaller portion uh it's maybe easier to outsource it keep it liquid. Um, and I'm guessing they may face redemption given the smaller amount. They may face redemption limits that would require them to have a Lido liquid product rather than um, uh, an ETF much like, you know, Grayscale and Black Rockck can uh, have on their own side. Um, but there's also uh, in the institutional side, you also have decentralized asset treasuries which have grown quite a bit lately. Uh, and my assumption is that, you know, we'll probably see a similarish evolution to the ETFs. Uh, they can already do essentially whatever

they want, but I do assume that quite a bit of this will probably end up being staked at some point. Uh, and it's over 4% of the supply, which is quite a bit. And that would equal to um whether to stake 70% of all this, about 12% of all ST teeth. So in total that will bring around 20% of institutional ETH uh being um uh u sorry lost my word um securing the network. Um and I'm sure it only goes up from here as well. Um yeah so that's I guess contextualizing you know how much will be institutionalized

uh in the staking landscape. Um, I was really curious because I don't know like we've been talking about this for so long. What you know is is ETH has always been at core about like the solo staker ethos and all this. uh but big players are coming to town and yeah I thought uh we might as well look into the numbers and also there's a a follow-up uh discussion on on on ETFs in general with uh with Anthonyo Hong uh who are going to discuss and talk about these uh potential uh the impact of those things.

Um yeah uh with that thank you very much. Uh I work on a lot of data. This is the staking area but you might have seen me in many other areas. I've done blobs. I've done ETFs. I've done central exchanges. Tomorrow I'm presenting my biggest project so far which is interrop uh made the biggest data set on June so far. So if you're at June con uh you're welcome to show up and and see me talk about that. Thank you. [applause] We do have uh plenty of time for questions. Are there any questions in the audience here?

>> Yeah, just uh with Coinbase disclosing the amount of stake they had. I thought this was going to be an ongoing basis. Uh was I incorrect to assume that? >> They used to disclose it in their quarterly reportings. Uh, and I've been uh trying to slew through those and understand because it's not clearly stated we stake this amount. Uh, I've been working with steakhouse quite a bit on this, but it's uh somehow less clear on every reporting and it's no longer in there as of two years ago now. Um, yeah, so I've been tweeting in the void.

>> Okay, we need to find Ben and tell him to get it sorted. Thank you. >> That would be great. uh they they've they have uh been disclosing CBTC uh and my assumption would be that eventually it would be the same for CB ETH, but that just never happened. Uh and the the answer I've gotten is essentially is just too scattered around many Coinbased teams and they can't get it sorted themselves. But that's a that's a weak answer. >> Just a followup question to that. Is there is there some standard or some type of uh published data that you would like to see institutions um produce in their quarterly reports or disclosures that would help uh maybe form a standard

for onchain uh clarity and transparency. >> So for for ETF issuers, I originally wanted them to hopefully have to publish their addresses. Uh Bitwise was the only one to do that at first. Um, unfortunately their client uh saw this as a as a concern and were actually, you know, it was it was pushing them away from using the product. So, Bitwise retracted from that and no longer publishes those. So, I understand it from like it's not their fault. It's just the client's perspective. Uh, I'll keep tagging them and and and pushing their addresses. Um there's also the other concern for them which is dusting attacks because they have to rep report anything they hold and you know that's

just annoying regulatory work uh because that's of course ETH uh on on ETFs but also any other assets on the ETH blockchain for Bitcoin it's even ordinals that they had to report. Uh it's just yeah it's a mess. So I understand it from the perspective. Um if there's something we can work out I would love to. Um I'm just not sure uh they have enough interest for that for them to go through with this. >> Okay. Question right here. >> Since um let's see here. Coinbase is um securing all of this crypto for all of these companies.

>> Yeah. >> And let's say Black Rockck wants to start staking. Are they is Black Rockck going to take their crypto back and then stake or is Coinbase going to stake for them? No, it's Coinbase custody that stakes it for them. Uh, that's what happened with Grayscale. >> Okay. >> And 21 shares. Um, >> so is that going to show up on Coinbase's portion as they're going to be quite a bit more and Black Rockck's not going to show up? >> In theory, yes. Uh, in you mean on my on my uh dashboards? Yes, it will. Uh, that's my goal is to take them eventually there. I haven't done it yet because there's a bunch of data work that I need to do in terms of code. But um yeah, but it's it's it's it's they're scrambling their stake

across many different things. So having the actual total is very very hard now. Uh yeah, they keep on changing their custody models like unstaking and restaking in different ways and it's just yeah they're obviously pretty good at at hiding on chain. Right, one last question here in the back. >> Thank you. Uh, yeah, I have heard that actually Coinbase uh st their funds with multiple node operators. I was wondering whether you have information or have you looked into that?

>> Oh, wait. Uh, yeah. Well, on the on one of the slides, there's in their reporting from February, they said that they have like 500,000 uh ETH uh held in with by um by other protocols, but they don't actually detail which um I don't know. I'm guessing killed and and stuff like this is uh is going to be those. I I don't actually know. There's not they're not very clear on that either. >> All right. Well, once again, a round of applause for Hillbaby here and his work. [applause] >> Thank you.