The Compass Staking Yield Reference Index Ethereum (“STYETH”) measures the annualized staking yield obtained when staking on the Ethereum blockchain. The index is published every day at 4:30 pm London time and is based on the net staking rewards paid by the network over the last 24 hours (preceding 4pm London time). Compass Staking Yield Reference Index Ethereum indices are part of the Compass Staking Yield Reference Index family.
STYETH grants investors access to robust and transparent reference yields that can monitor the performance of their staked assets. Moving forward, product issuers will be able to offer investors total return exposure to crypto assets by use of a reliable benchmark. The index will provide valuable insight into the Ethereum blockchain on a dynamic level, reduce information asymmetry, and improve market efficiency related to staking.
Providing a reliable and trusted staking yield
In order to avoid potential conflict of interest or the risk of using incomplete information, Compass has decided to extract information directly from the Ethereum blockchain by connecting to a node, without the use of an external data provider. The staking computation implements the Consensus-Specs as described by Ethereum core developers, meaning that rewards and penalties are the same as those computed by the network and therefore earned by validators.
A reliable and independent benchmark for Ethereum Staking Yield
Understanding Staking and Proof Of Stake
Staking on the Ethereum blockchain
Staking ether (ETH) involves holding a quantity of ether in order to become a validator and support the security and operations of the Ethereum blockchain.
Staking gives network participants an economic incentive to act in the best interests of the network.
Validators are rewarded for carrying out validator duties, but lose varying amounts of ETH if they misbehave. Ethereum uses a consensus mechanism called Proof of Stake, in which the network ensures that all transactions are verified and secured without a trusted third party in the middle.
Proof of Stake (PoS)
Proof of Stake, the newest consensus mechanism, aims to increase speed and computing resources consumption efficiency while simultaneously lowering fees, all without sacrificing the security of the network.
In Proof of Work mechanisms (the mechanism previously used by Ethereum before The Merge and currently used by Bitcoin), miners prove they have capital at risk by solving complex mathematical puzzles.
Proof of Work is a proven robust mechanism to facilitate consensus in a decentralized manner, but it involves substantial arbitrary computation. This makes it a very energy-intensive process.
In Proof of Stake mechanisms, network participants (also called validators) stake capital which acts as collateral that may be burnt if the validator behaves dishonestly or lazily. The validator is then responsible for checking that new blocks propagated over the network are valid, while occasionally creating and propagating new blocks themselves. If the validator fulfills these actions, they receive awards called “staking rewards”.