BTC Digital Opens Ethereum Proof of Stake to Investors

Blockchain technology company BTC Digital Ltd.. (NASDAQ: BTCT) has launched its first Ethereum (ETH) staking offering to expand its portfolio beyond Bitcoin mining operations.

The company announced its expansion on Monday, in line with its strategic goals to add more revenue streams by participating in the Ethereum validator rewards program.

BTC Digital offers Ethereum staking services with key features that include asset custody provided by Matrixport Technologies Ltd.

This collaboration ensures secure and reliable custody of Ethereum assets, providing customers with peace of mind and protecting their assets.

Additionally, BTC Digital’s foray into Ethereum staking aims to diversify its revenue streams while maintaining its commitment to the Bitcoin ecosystem.

By participating in the Ethereum Validator Rewards Program, BTC Digital strives to improve its overall profitability and ROI, providing customers with the opportunity to maximize their returns.

“Our goal is to create new, predictable and recurring digital rewards by entering another premier digital asset ecosystem,” said Alan Peng, CEO of BTC Digital.

“It should be noted that we will continue to invest and expand our mining operations. We believe that Bitcoin mining and ETH staking are complementary areas of business that will improve our overall profitability and returns.

Ethereum staking involves locking ETH in a wallet to support blockchain operations and security. Stakers receive rewards, usually more ETH, for validating transactions and maintaining network integrity.

This represents a shift from proof-of-work consensus mechanism to proof-of-stake, and it is essential for the energy efficiency and scalability of Ethereum. Stakers play a crucial role in securing the blockchain and are compensated for their efforts.

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Proof of Stake Increases Security and Scalability

Ethereum has moved from the Proof-of-Work consensus mechanism commonly used by Bitcoin and its derivatives to a Proof-of-Stake mechanism in 2022, as it provides increased security, reduced power consumption, and greater adequacy. This also makes it easier to scale solutions compared to previous proof-of-work architecture.

During the proof-of-work era, Ethereum rewarded miners for validating transactions by issuing approximately 5.4 million new Ether each year. Ethereum did this to keep the network secure and funded it primarily through the inflation of the native cryptocurrency. Ethereum could eventually reach an annual issuance of 1 million ETH as the staking rate increases. This amount nevertheless remains significantly lower than before the merger.

As a result, Ethereum has maintained an annual inflation rate of around 3-4% to cover this security cost. However, the transition to proof-of-stake has significantly reduced the cost of security, allowing Ethereum to reduce its annual issuance to 816,000 Ether, based on the current staking ratio.

Since the merger, Ethereum has seen a significant reduction in supply due to burning the majority of ETH paid in transaction fees, thus removing it from circulation.

This reduction amounts to almost 300,000 Ether. This stands in stark contrast to the scenario in which the merger did not occur, in which Ethereum would have seen its supply increase by almost 3.9 million ETH over the past year.

Ethereum has not only become deflationary since the merger but has also changed the way it rewards its stakeholders. Instead of miners receiving issuance, holders of Ether are rewarded if they choose to stake it, making Ethereum a financially sustainable cryptocurrency that provides holders with negative supply change and staking rewards.

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