Staked ether should be seen as the benchmark of the decentralized economy

Speaking concretely, if staked ether offers 2.75% yield on average per year — as illustrated by CoinDesk’s Composite Ether Staking Rate (CESR) — an investor considering a closed-end token fund has a clear hurdle rate. That fund needs to outperform ETH by more than 31% over a period of 10 years just to make the risk worthwhile.

So crypto firms and crypto tokens are in constant competition with staked ether. They have to prove that they can generate better returns than this benchmark. They have to produce earnings, grow their cash flows, and compete for capital. Otherwise, they will lose investor interest.

On the other side of the table, with a true benchmark, investors can finally structure crypto portfolios like they do in TradFi. They can treat staked ether as the base layer, add higher-risk yield sources only when they meaningfully outperform, and avoid products whose returns don’t justify the additional risks.

Staking is crypto’s only true yield innovation

We have to imagine the decentralized side of crypto as an economic zone in its own right, almost a virtual nation. Like any physical nation, it is often influenced by outside forces (like, say, the United States’ monetary policy), but that doesn’t prevent it from having its own yardsticks, its own guidelines, its own set of rules.