FTX tries to list ETH ‘Beacon Chain’ when the deposit agreement becomes active

Will an active secondary market for ether (ETH) emerge locked into the Ethereum 2.0 deposit agreement?

This is the question on the tip of the tongue of almost every trader on Wednesday after the release of the deposit agreement by the Ethereum Foundation. As of press time, that contract contains approximately 5,000 ETH worth $ 2 million.

Launching a derivatives market for the beacon chain ether would provide liquidity to investors who cannot exit stakes. This is because the depository contract is a one-way bridge to at least Eth 2.0 Phase 1, also known as Serenity.

Still, some exchanges like FTX they are looking to launch markets for “Beacon chain ether” (BETH) or ether with tokenized staking, or ether which has been staked in the Eth 2.0 deposit agreement. In doing so, a second ether resource may appear.

One-way traffic in Eth 2.0 was a design decision made to stop the formation of a second tradable ether asset, Ethereum Foundation researcher Justin Drake said in a statement. tweet. In fact, Ethereum co-founder Vitalik Buterin questioned who would provide liquidity for a token representing staked aether. “Just switching ETH to the Eth2 chain is not profitable,” he said.

But that reasoning wouldn’t necessarily prevent exchanges, for example, from creating a token that acts as an IOU for the staked funds, Coin Metrics co-founder Jacob Franek explained in another. tweet wire. (The idea has even stronger legs when you consider the decentralized finance (DeFi) token boom this summer.)

He said a secondary market for staked ether tokens would only be as deep as the amount of ether locked into the depository agreement. Its trading quality will also depend on whether market makers start actively trading the theorized asset.

The value of the token itself would be linked not only to the underlying inflationary premiums that stakers receive – between 8% and 15% per annum – for the deposit of ether in the Beacon chain, but also to the inherent risks of trading a product in on top of the Eth 2.0 blockchain under construction.

For example, penalties for non-validation of the new chain affect ether deposits. Those penalties, at some point, would affect how the staked Aether token is traded.

“The security concern is the agent’s main problem because the people who take the financial risk are no longer the ones who make the locks and the people who validate the locks have no direct financial risk, only indirect,” he said. to CoinDesk the independent cryptocurrency researcher Hasu in a message from Telegram.

A staked secondary market in ether would likely be related to the amount of ether held on a centralized staking exchange. This could open some exchanges to security concerns, said Hasu, who referred to the business as “derivative staking or securities staking or securitized holding.”