Polkadot and Cosmos outperform Ethereum in staking

Bloomberg commodity strategists say Polkadot and Cosmos are outperforming Ethereum (ETH) in staking.

Higher staking activity recorded in Polkadot and Cosmos compared to Ethereum

In a recent Bloomberg report, two commodity analysts Mike McGlone and Jamie Douglas Coutts pointed out a new factor that is making the Polkadot and Cosmos cryptocurrencies outperform Ethereum’s blockchain. 

In the latest Bloomberg Intelligence: Crypto Outlook report, the two analysts say that in terms of fee structure and issuance system, Ethereum enjoys strong dominance over much of the market. But this now appears to be no longer sufficient to maintain this market dominance:

“As a result of Ethereum’s dominant market share in fee income and sound monetary (issuance) policy, capital deployment in the crypto economy is likely to start pricing risk relative to Ethereum’s real/adjusted rate (yield).”

According to Bloomberg’s two strategists, Polkadot and Cosmos – two of Ethereum’s fiercest blockchain rivals – are offering high staking yields, which certainly makes them more attractive to investors compared to Ethereum:

“On Bloomberg’s list of layer-1 crypto assets, only two networks have real yields that trade with a positive spread to Ethereum’s benchmark rate of 5.03%. Polkadot trades at a 0.77% premium while Cosmos is at a 0.10% premium. The assets which trade at negative spreads may be victims of mispricing. Inflation/issuance for these assets may need to undergo a radical reduction, similar to Ethereum, in order to attract more capital.”

The importance of staking in the crypto world

According to Mcglone and Coutts, staking is becoming a very important element for the industry, and the two compare it to investing in bonds: 

“The emergence of crypto as an asset class in conjunction with a yield component presents a new set of considerations for investors when assessing the risk/reward opportunities in this space. Given the volatility and newness of the demand for smart contract use, staking assets could be considered as equivalent to junk bonds. Yields for proof-of-stake are similar to corporate bonds in that they’re tied to the fees/cash flows of the network/company.”

Polkadot and Cosmos offer superior returns to Ethereum and other blockchains as argued by Bloomberg’s two analysts in their report: 

“Polkadot trades at a 0.77% premium while Cosmos is at a 0.10% premium. The assets which trade at negative spreads may be victims of mispricing. Inflation/issuance for these assets may need to undergo a radical reduction, similar to Ethereum, to attract more capital.”

Polkadot, but also Cosmos and Avalanche, have often been called Ethereum killers in the past, precisely because of their lower transaction costs and greater sustainability and scalability of their blockchain.

But the decline in the crypto market in recent months and in some sectors such as DeFi and especially NFTs, has affected the rise of these blockchains. Ethereum still retains about 70% market share, and its new update, Merge, may now make it even more attractive to investors also in terms of the metrics considered by the two Bloomberg analysts.