Tempus Takes #10
On the Verge of the Merge
After many years of use of the proof of work (PoW) consensus mechanism, the Ethereum Foundation has decided to move to the proof of stake (PoS) mechanism. PoS is more secure, less energy-intensive, and better for implementing new scaling solutions. The first step to implement PoS was through the launch of the consensus layer called the Beacon Chain, running alongside the existing Ethereum mainnet.
The transition from Ethereum PoW to PoS is a gradual process and the Beacon Chain was the first step, followed by the merge that will most likely land around mid-September.
We have decided to cover how things will change post merge. Since Lido manages more than 30% of the staked ETH on the Beacon Chain, it is important to discuss this from a stETH point of view.
stETH will continue to exist in the ecosystem
stETH is the first token that was whitelisted on Tempus and the Tempus Labs team also received a grant of $30,000 in LDO from Lido to integrate stETH on Tempus to offer fixed interest rates to all stETH holders.
Today, Lido has approximately $7bn worth of ETH staked on its platform and stETH will continue to exist even after the merge. Additionally, depositors will have to wait until the next phase after the merge to be able to unstake their staked ETH tokens and withdraw them.
While current interest rates continue to fall as more ETH is staked on the Beacon Chain, the interest rates will be variable on the PoS chain, and will also include the MEV rewards. Rewards on stETH are therefore expected to be higher than the current APR of 3.9%. We expect these rewards to be in the range of 8–10%.
Want to know more about how MEV rewards will boost the rewards on stETH? Read the blog below:
To boost the APR for stETH, Lido has rolled out changes to its mainnet contract code, in which priority fees or “tips” will be re-staked in the protocol with the same fee structure as normal staking (90% to stakers, 5% to the protocol, and 5% to node operators).
Wen Merge?
The merge has been tested on several testnets of Ethereum and they’ve all successfully been merged! The merge for Ethereum mainnet is targeted for 15 September 2022.
Market Movement
The yield on ETH has grown by approx 1% in the last few weeks, signaling higher selling pressure ahead of the merge
The current fixed rate available on stETH on Tempus fixed income is 5.04%, whereas the fixed rates on USDC and DAI are at 3.16% and 4.19% respectively.
To fix your interest rates, click here.
Disclaimer
The information provided in this article is provided for informational purposes only and does not constitute, and should not be construed as, investment advice, or a recommendation to buy, sell, or otherwise transact in any investment, including any products or services, or an invitation, offer, or solicitation to engage in any investment activity. You alone are responsible for determining whether any investment, investment strategy, or related transaction is appropriate for you based on your personal investment objectives, financial circumstances, and risk tolerance. In addition, nothing in this article shall, or is intended to, constitute financial, legal, accounting, or tax advice. We recommend that you seek independent advice if you are in any doubt.
