Cryptocurrencies may generate dividend-like returns Cryptocurrencies may generate dividend-like returns Cryptocurrencies may generate dividend-like returns

Cryptocurrencies may generate dividend-like returns

Mads Eberhardt

Cryptocurrency Analyst

Summary:  It is typical to hear that cryptocurrencies do not generate value for the holders, except for a potential increase in the price of a given cryptocurrency. Yet, contrary to this popular belief, some cryptocurrencies may give additional returns similar to dividends or buyback programs of equities, although the fluctuations in cryptocurrencies are rather large right now compared to the dividend-like returns.

Cryptocurrencies are often criticized for not providing any financial benefits to their holders in contrast to holding equities, where holders benefit from dividends and buybacks to reduce outstanding shares by effecting a buyback program.

Not only do the majority of cryptocurrencies not provide financial benefits to holders, but they also often dilute the very same holders, as they issue new coins to miners and stakers to incentivize them to verify transactions. A regular holder of Bitcoin as well as other proof-of-work cryptocurrencies will be diluted over time. In terms of Bitcoin, 1.7% of the supply is presently issued annually to miners. For proof-of-stake frameworks such as Ethereum, regular holders are also diluted by a similar mechanism – unless the holders decide to stake their coins.

Ethereum provides staking rewards but does not dilute stakers

In proof-of-stake, to compensate stakers with rewards without simultaneously diluting them, transaction fees are absolutely crucial. In the past 30 days, Ethereum has generated $69.71mn from transaction fees, which are particularly burnt and paid to stakers. Since adopting a proof-of-stake framework on September 15th this year known as the Ethereum merge, Ether holders have been able to earn an annual reward of up to 7% by staking their Ether. The reward is derived from newly issued Ether and the unburnt transaction fees.

Although the network issues new Ether to stakers, since it also burns the majority of transaction fees, the supply has largely been constant since the Ethereum merge. So, the rewards to stakers have not come at the expense of dilution but rather due to transaction fees. It is important to notice that stakers lock up Ether for the foreseeable future and risk being slashed, meaning the network can ultimately take all their Ether in case the staker acts dishonestly. The latter occurs relatively rarely. Likewise, stakers have ongoing expenses to verify transactions, but they are estimated to be below 10% of the rewards. At present, around 15.6mn Ether are presently staked out of a total supply of 120mn.

Again, if you do not stake Ether, you will not receive a direct reward. Yet, the supply may turn negative, if burnt fees exceeds newly-issued Ether. This occurs in times of high demand for Ethereum-based transactions. If the high demand for transactions in 2021 is to be repeated in the future, we are likely to see an annual negative supply growth of up to 1%. This would benefit all holders of Ether, not just those who are staking it.

ENS has $43mn on its book

It is not only native blockchains to possibly generate yield. Here, we also find tokens, in other words, protocols based on, for instance, Ethereum. We stay within the ecosystem of the latter, namely Ethereum Name Service or ENS in short. ENS is the decentralized protocol for registering domain names on Ethereum. Like ordinary domain names, there is a small recurring cost to keep ownership of an ENS domain. Last month, ENS generated a revenue of $1.7mn, while its all-time high was in May of this year at nearly $10 million. Although the revenue is almost as volatile as crypto prices, it implies that protocols can generate revenue too.

Monthly revenue of ENS. Source:

After paying expenses to further develop and market the protocol, the revenue of ENS is paid to the treasury of the DAO (decentralized autonomous organizations) of ENS. This is the treasury that the holders of the ENS token control, and they decide what to do with it. At present, ENS has over 35,000 Ether in its treasury, worth over $40 million. At a fully diluted market capitalization of the ENS token of $1.3 billion, having a treasury of over $40 million is relatively insignificant, but it shows that a DAO can generate revenue, have a treasury, and potentially compensate holders in the future. To compensate holders, a DAO may use its treasury to buy back and burn its native token to potentially increase the price of its token, as the decentralized stablecoin MakerDAO has done.

No certainty about dividend-like returns

It should not be a surprise for any that crypto prices are greatly volatile. So, as long as this is the case, the perception of dividend-like return is likely to be negligible to traditional investors. In our view, when your potential downside is as high as e.g., 90% on the asset itself, you do not appreciate the potential 4% you receive in annual staking rewards. To make matters worse, the staking reward is denominated in the respective cryptocurrency, so the real yield of staking is perfectly correlated to the asset, so if the asset tumbles by 50%, the staking reward does so as well. This is contrary to a traditional dividend paid in cash.

Not only are the prices volatile, but as stressed by both Ethereum and ENS, their respective revenues are highly volatile, effectively causing the potential reward to be volatile. One day, Ethereum may burn more Ether than it issues, but the next day it may burn much less than its issuance rate. As long as the use cases for cryptocurrencies are purely speculative, the volatility in prices nor revenues will decrease. This makes it difficult to predict and manage the potential value generated by these cryptocurrencies. The volatility, however, will first decrease sufficiently the day crypto is used in more genuine use cases. The latter may lead the broader market to recognize that cryptocurrencies can create a constant real yield. However, there is no guarantee that these use cases will ever emerge.

The examples mentioned herein are not endorsements of the individual projects, but rather show that, in our view, various cryptocurrencies may generate dividend-like returns, somewhat similar to equities.


The Saxo Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (
- Full disclaimer (

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo or its affiliates.

Saxo Capital Markets HK Limited
19th Floor
Shanghai Commercial Bank Tower
12 Queen’s Road Central
Hong Kong

Contact Saxo

Select region

Hong Kong S.A.R
Hong Kong S.A.R

Saxo Capital Markets HK Limited (“Saxo”) is a company authorised and regulated by the Securities and Futures Commission of Hong Kong. Saxo holds a Type 1 Regulated Activity (Dealing in Securities); Type 2 Regulated Activity (Dealing in Futures Contract); Type 3 Regulated Activity (Leveraged Foreign Exchange Trading); Type 4 Regulated Activity (Advising on Securities) and Type 9 Regulated Activity (Asset Management) licenses (CE No. AVD061). Registered address: 19th Floor, Shanghai Commercial Bank Tower, 12 Queen’s Road Central, Hong Kong.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products may result in your losses exceeding your initial deposits. Saxo does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo does not take into account an individual’s needs, objectives or financial situation. Please click here to view the relevant risk disclosure statements.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit

The information or the products and services referred to on this site may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and services offered on this website are not directed at, or intended for distribution to or use by, any person or entity residing in the United States and Japan. Please click here to view our full disclaimer.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc. Android is a trademark of Google Inc.