Markets
Leveraging CESR Benchmarks to Gain a Competitive Advantage
As the staking industry matures and more node operators enter the market, the need for performance metrics becomes increasingly important to gain a competitive advantage. Ethereum’s staking rate is the closest equivalent to the “risk-free rate” of digital currencies.
Institutional staking service operators, such as Pier Two (where I work as CFO) and Figment are committed to ensuring the security and stability of the Ethereum ecosystem, while providing customers with best-in-class staking returns.
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One such metric that is gaining traction is the Composite Ether Staking Rate (CESR) benchmark, created by CoinDesk Indices and CoinFund. CESR measures the average staking rate on the Ethereum network, providing a reliable benchmark for operators and stakers to evaluate performance. By comparing staking rates to CESR, operators can objectively assess their competitiveness and effectiveness.
Why Benchmarks Matter
Benchmarks are important in financial markets to create structure, standardization, and comparability for many financial products, including ETFs. The CESR is a useful rate for issuers who want to offer ETH Staking funds and for validators who want to engage in performance tracking or swaps to lock in rates and build more sustainable and less volatile business models.
How traders can use the CESR benchmark
1. Performance Benchmarking
CESR provides operators with a metric to compare their validator performance to the broader network. By comparing their returns to a trusted industry benchmark, operators can identify areas for improvement and optimize their operations, as well as differentiate their staking products in a competitive market.
The CESR benchmark promotes healthy competition among operators. Those who perform better are rewarded with more delegations, while those who do not perform better are incentivized to improve their performance to remain competitive.
2. Market Monitoring and strategic insights
CESR enables traders to gain deeper insights into the Ethereum ecosystem. By monitoring trends, traders can make informed strategic decisions and adapt to market conditions and network changes (including the recent 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 sound operating practices and careful monitoring.
3. Improved infrastructure performance with nominal RAVER
Reliable and high-performance infrastructure is key to successful yield. Operators must leverage high uptime, low latency, and rigorous operational protocols to maximize staking efficiency and rewards. Using Evaluating the effectiveness of the Rated validator (RAVER) helps measure these factors, taking into account uptime, consensus participation, and overall reliability.
By using CESR as an industry signal and Rated’s RAVER metrics to measure infrastructure performance, an institutional staking service operator can optimize to maintain a competitive edge. This comprehensive approach allows operators to continually refine strategies and operations to further improve services.
The CESR benchmark provides a tool for traders to measure and improve their performance within the Ethereum ecosystem. By leveraging CESR alongside operational metrics such as RAVER Classificationoperators 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. The CESR will continue to be used by market participants, validators, and financial institutions around the world as they engage in products that reference Ethereum as the Internet’s first fundamental financial rate of return.
Note: The views expressed in this column are those of the author and do not necessarily reflect those of CoinDesk, Inc. or its owners and affiliates.