First Mover: Ethereum's Transition to Staking Could Push More Traders to Use Derivatives

The new "Staking" system could lock up so many of the network's native ether tokens that investors who want to trade them may have to rely on derivatives markets.

Under Ethereum's multi-year upgrade now underway, the network would shift to a "Proof-of-stake" model, where investors validate transactions by staking ether on the blockchain in exchange for token rewards.

A possible consequence is the new staking system could soak up as much as 30% of the ether tokens in circulation, based on estimates from Adam Cochran, a partner at MetaCartel Ventures, a decentralized investment firm.

In May, a survey by the Ethereum developer Consensys found that 65% of ether investors were planning to stake the cryptocurrency under the new system, known as Ethereum 2.0, and half of those wanted to run validator nodes.

Rocket Pool Staking, an Ethereum 2.0 staking service, offers staking terms ranging from three months to a year.

Some ether tokens might get locked in staking as the network upgrade proceeds.

Fixed income from staking could even be packaged as a distinct product.

Holders who stake their coins could create voucher tokens representing a claim on the stake.

Messari's Withiam says he thinks staking derivatives are inevitable.

There's no lack of motivation: Plenty of cryptocurrency analysts say it's possible ether's price could jump as demand increases for tokens to stake.