Mainstream financial institutions have raised concerns about the cryptocurrency market since its inception but the tide seems to be turning in 2021. Although JPMorgan Chase and its CEO Jamie Dimon have bashed digital assets before, it looks like some of the bank’s officials had other thoughts.
In a report this week, JPMorgan analysts claimed the creation of energy-efficient blockchains would pave the way for staking. They added that current blockchains suffer from the fact that they consume mammoth amounts of electricity and become contributors to global warming. JPMorgan’s latest report was contradictory to Dimon’s searing comments about the crypto market and its alleged lack of mainstream financial effectiveness.
One of the main discussions in the report revolved around staking and how it is a better alternative for customers to earn rewards for the investments. Right now, cryptocurrencies like Bitcoin and Ethereum use a Proof-of-Work-based foundation that requires gigawatts of power. Applying a Proof-of-Stake system not only reduces the energy consumed but also benefits users and their long-term gains. The report read:
“Not only does staking lower the opportunity cost of holding cryptocurrencies versus other asset classes, but in many cases, cryptocurrencies pay a significant nominal and real yield. The yield earned through staking can mitigate the opportunity cost of owning cryptocurrencies versus other investments in other asset classes such as US dollars, US Treasuries, or money market funds in which investments generate some positive nominal yield.”
With blockchains like Ethereum 2.0 on the horizon, the authors of the report stated that they would become a major source of income for cryptocurrency organizations. For example, Coinbase alone is expected to rake in $200 million in revenue from staking in 2022. To put this in perspective, the Brian Armstrong company only generated $10.2 million in 2020.
Users should know that staking is dependent on market volatility and does not create ROI the same way as traditional investments. Experts believe that staking will become a reliable source of income as the cryptocurrency market matures and its volatility decreases.