Three years after the launch of ETH staking, validators are voluntarily exiting Ethereum — 1,018 validators per day since early October, as per Glassnode analysis. This dynamic coincides with increasing staking centralization, with the top 10 whales controlling an ever-increasing share in ETH supply, according to Santiment data. What’s going on in Ethereum, and what’s behind these dynamics?
In recent weeks, Ethereum’s staking pool dynamics have experienced notable shifts, marked by a significant slowdown in validator growth and a rising number of validators exiting the staking pool, averaging 1,018 validators per day, as Glassnode’s analysis reveals. This uptick aligns with the recent uptrend in spot prices across crypto markets.
The majority of exits observed over the past eight weeks were voluntary, as per Glassnode’s report. This means stakers are choosing to exit the staking pool willingly, as opposed to being forced out due to slashing – a penalty applied to validators who violate protocol rules.
“Kraken and Coinbase stand out as top providers seeing withdrawals, while Lido leads in exits among Liquid Staking Providers. However, these same entities, with Lido taking the lead, are also the primary recipients of stake deposits, showing a net stickiness and dominance of these large pools of capital” — Glassnode.
At the same time, on-chain data shows that the top 10 Ethereum whales have set a new all-time high for their ETH holdings.
While Santiment analysts cite this data from an optimistic perspective, referring to whales withdrawing their coins from exchanges as an indication of a presumable move towards long-term cold storage (good for valuations), this trend also implies a growing centralization of ownership… in the network where the largest holders have the greatest weight in its consensus.
On the other hand, the diversity of clients on the network is often emphasized as one of the key strengths of Ethereum, a hallmark of its resilience through that kind of decentralization.
Following Ethereum’s upgrades that enabled withdrawals of coins from staking, the network now adapts to new circumstances, experiencing a noticeable shift in its staking pool dynamics. An increasing number of validators are exiting the pool. This trend has led to a slowdown in the ETH issuance and marks the first decrease in the staking pool’s balance since the Shanghai upgrade. Additionally, a recent surge in network activity, particularly in token transfers and stablecoin transactions, has boosted transaction demand on the Ethereum network. These two factors combined have led to Ethereum’s global supply becoming deflationary once again, a condition generally seen as bullish for ETH prices.
However, concerns about increased network centralization within Ethereum persist. Vitalik seems aware of these issues and is ready to implement further protocol changes to address them — in a perfectly decentralized way, for sure.
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