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

Crypto has evolved from a speculative frontier into a functioning economic system with its own financial plumbing and capital markets. As this system matures, investors are being flooded with yield products of every variety: staking, re-staking, lending markets, stablecoin rewards, and increasingly complex managed strategies.

But not all yield is created equal. These products rely on different infrastructures, different sources of return, and different risk profiles. Investors who treat them as interchangeable are missing one of the most important developments of the crypto space: the decentralized economy has effectively produced its own benchmark, meaning a standard against which other financial instruments within the ecosystem can be compared.

Benchmarks are crucial. Without them, investors cannot price risk, value cash flows, or structure portfolios. A functioning benchmark acts like a lighthouse: it allows traders to properly navigate the market opportunities in front of them.

The argument, here, is that staked ether (more precisely, the yield produced by ether tokens when they’re locked in the Ethereum network to secure the blockchain) has become the benchmark for 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.

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.

If this ecosystem is a special economic zone, it needs (for the good health of its financial markets) a native benchmark yield-generating asset. The U.S. financial system, for example, revolves around benchmarks like the U.S. 10-year Treasury or the Secured Overnight Financing Rate (SOFR).

At first glance, it may seem logical for stablecoins backed by U.S. Treasuries to fulfill the same role for crypto. If U.S. Treasuries serve as benchmarks to the world’s largest economy, why wouldn’t they be good enough for the (much smaller) decentralized economy?

However, dollar-backed stablecoins are tokenized securities whose returns are entirely tied to Federal Reserve policy. Their interest rates rise and fall for reasons that have nothing to do with onchain activity.

Staking, meanwhile, aligns economic incentives with decentralized network security. You earn a network’s tokens for validating a network’s blocks. The more activity there is onchain, the higher the yield becomes. This is a primitive that doesn’t exist in traditional finance.