Performing Against an Ether Staking Rate

By Tom Whitton, CFO, Pier Two. Authors' views and opinions are their own and not associated with CoinDesk Indices. Conducted by CoinDesk Indices and not associated with CoinDesk editorial.

Understanding CESR

One such metric gaining prominence is the CESR (composite ether staking rate) benchmark, created by CoinDesk Indices and CoinFund. CESR measures the average staking rate across the Ethereum network, providing a reliable standard for operators and stakers to gauge performance. By comparing staking rates to CESR, operators like Pier Two can objectively assess their competitiveness and effectiveness.

Why Benchmarks are Important

Benchmarks are important in financial markets to create structure, standardisation and comparability for many financial products, like ETFs. CESR is a useful rate for issuers that are looking to offer ETH Staking funds, and for validators that are looking to engage in performance monitoring, or swaps to lock in rates and build more sustainable and less volatile business models.

How Operators Can Use the CESR Benchmark

1. Performance Benchmarking CESR offers operators a reliable metric to benchmark their validator performance against the broader network. By comparing their returns to a trusted industry benchmark, operators can identify areas for improvement and optimise their operations, as well as to differentiate their staking products in a competitive market.

For example, as you can see in the below chart, Pier Two’s APR has consistently outperformed the CESR benchmark, with our 7-day APR of 3.79% and our 30-day APR of 3.58%, compared to CESR's 7-day APR of 3.35% and 30-day APR of 3.38%, meaning higher returns for our customers' staked assets than the industry average.

The CESR benchmark fosters healthy competition among operators. Those who outperform are rewarded with increased delegations, while those who don’t are incentivised to enhance their performance to remain competitive.

2. Market Monitoring and Strategic Insights

CESR enables operators to gain deeper insights into the Ethereum ecosystem. By monitoring trends, operators can make informed strategic decisions and adapt to market conditions and network changes (e.g., Shapella and Dencun upgrades).

The CESR benchmark demonstrates that well-managed operators can achieve consistent returns despite market and network fluctuations. This underscores the value of robust operational practices and vigilant monitoring.

3. Enhancing Infrastructure Performance with Rated RAVER

Reliable and performant infrastructure is key to yield success. Operators must leverage high uptime, low latency, and rigorous operational protocols to maximise staking efficiency and rewards. Using Rated’s Validator Effectiveness Rating (RAVER) helps measure these factors, considering uptime, participation in consensus, and overall reliability.

A key factor in our yield success is our robust infrastructure, which ensures minimal downtime and optimal node performance. We leverage high uptime, low latency, and rigorous operational protocols to maximize staking efficiency and rewards for our customers.

As shown in the chart below, Pier Two's 7-day RAVER stood at 98.30%, compared to the top 15 node operators by market share average of 97.46%, and our 30-day RAVER maintained a 98.00%, surpassing the top 15 node operators by market share, with an average of 97.21%.

By using CESR as the industry signal and Rated's RAVER metrics to measure infrastructure performance, operators like Pier Two, can optimise to maintain a competitive edge. This comprehensive approach allows operators to fine-tune strategies and operations continuously, to further enhance services.

Practical Example: Maximising Returns

Consider an example customer with 100,000 ETH staking for one year using the 7-day APYs of Pier Two and CESR:

This difference of 457 ETH illustrates the potential additional rewards for customers who use high-performing operators (i.e. those who outperform metrics on CESR and RAVER).

Final Thoughts

The CESR benchmark offers a vital tool for operators to measure and enhance their performance within the Ethereum ecosystem. By leveraging CESR alongside operational metrics like Rated’s RAVER, operators can achieve greater transparency, trust, and efficiency. As the Ethereum network continues to evolve, these benchmarks will play an increasingly vital role in guiding and evaluating validator success. CESR will continue to be used by market participants, validators and financial institutions worldwide when engaging in products that reference Ethereum as the first bedrock financial rate of return for the Internet.

Institutional staking service operators, like Pier Two, are dedicated to providing security and stability to the Ethereum ecosystem while delivering premier staking yields to customers. To uphold this commitment, we recognise the importance of robust performance metrics.

For more information on Pier Two visit: https://piertwo.com/

For more information on CESR visit: https://www.coindesk.com/indices/ether/cesr