Ethereum main net successfully completed the Shapella upgrade on April 12th. Shapella’s update effective execution means that Ethereum validators can finally withdraw their Ether staked on the Beacon chain.
Enabling withdrawals for Ethereum staking on the Beacon blockchain indicates that the Ethereum proof-of-stake has reached a point of satisfactory stability and security, and stakers who participated in securing the network will be able to recover their staked funds.
Regarding the aforementioned, there are concerns about mass withdrawals, around 94,800 Ethereum have been deposited on the network in the last 24 hours, while some Ethereum enthusiasts are more optimistic about the network than ever before.
According to data compiled by Nansen, the total amount of staking deposits reached $198.7 million, or 94,800 ETH, in the last 24 hours.
Staking as Central Activity Delivered by the Shapella’s Update
Staking takes center stage after the latest network upgrade in Shanghai on Wednesday. This change has allowed users who had their ETH block up for two years to finally be able to withdraw their holdings.
A staking is when a user commits cryptocurrency to the network in order to operate it. Ethereum requires staking because it currently runs on a proof-of-stake blockchain, using validators rather than miners to secure the network.
Those who do staking get digital currency rewards in the process. Ethereum moved to proof of stake last year in a long-awaited transition known as a merger.
However, going back to the latest data, ETH deposits are still negative, indicating that, there are still more withdrawing entities than staking entities in general.
Nansen analyst Martin Lee pointed out “That’s to be expected, because this is just the beginning,” “Validators who have accumulated excess ETH for earnings will want to unstack as they are only accumulating rewards on 32 ETH.”
Validators can choose between “partial exit” or “full exit” when leaving the network. Partial exit refers to validators who only keep the cumulative reward, but continue to keep their 32 ETH stake in the network while Full Exit refers to validators who decide to withdraw their rewards, the 32 ETH initial deposit, and leave the network completely.
Remarkably, there was even a brief moment where deposits far outnumbered withdrawals, with 27,000 ETH deposited and only 7,615 ETH withdrawn yesterday.
According to a chart showing withdrawals and deposits on Ethereum published by Nansen, top deposits up to now have come from a few entities such as Lido, OKX, Kiln.fi, Frax, Lee informed. Though, the most outstanding is coming from a wallet labeled ‘P2p ETH2 Depositor’ as they have deposited 50,000 ETH lately.
As for the descending trend in withdrawals, Lee indicated that the network will soon reach a “baseline” once this first wave of validators can claim the accumulated rewards.
This analyst from Nansen has expressed that it is expected that there will be an uptick at the beginning since, as mentioned, even validators who want to continue staking will want to withdraw their accumulated earnings and get their hands on them again.
Regardless of the immediate impact of withdrawals, Ethereum continued success of proof-of-stake depends on incentivizing ETH holders to validate the network, and staking has proven to be an effective mechanism for doing so.
By Marina Meza
