Ethereum Staking Gains Prominence But Vagueness Still Persists

What is Shapella? How is it Impacting Ethereum?

It seems that the much-awaited Shapella Upgrade has impacted the Ethereum network too. The former went live on the ETH mainnet earlier this year. It has now started boosting the staking as per a recent Glassnode update. The largest Proof-of-Stake (PoS) network noted an all-time high (ATH) of 27.03 Million. Since the launch of Shapella, the upgrade resulted in a 40% spike. 

Shapella brought some new features to the network. It enabled withdrawals for all users who have locked their ETH holdings in the staking mechanism. It opens up a new channel of passive income for the holders. Consequently, it has encouraged the hesitant token holders to go staking. Moreover, these holders initially assessed the unstacking mechanism after the upgrade’s launch.

This resulted in a spike in withdrawal requests. But since then, the number of deposits has surpassed withdrawals. Nansen, a blockchain research firm, has a total amount locked, equaling 21% of ETH’s circulating supply.  Notably, the ratio of the depleting supply never matched that of the increasing staked amount. After Shapella, ETH’s reserve has downsized by more than 20%. 

The liquid supply comprised 18% of the overall supply available to the public. The interesting fact is considered a forerunner for long-term trends in Ethereum. It drove people to use ETH to eke out income from the markets. But the dwindling rewards have not affected the growing demand for staking. 

Impact of Liquid Staking

Shapella has made Liquid Staking Tokens (LST) valuable for investors by giving a push to staking. These tokens let their holders participate in staking. Furthermore, they can be used in DeFi programs to yield more revenue. Meanwhile, Lido Staked ETH and Rocket Pool rETH are replacing native tokens in many DeFi networks. The upgrade helped liquid staking protocols enhance their dominance. 

They have highlighted the attributes of staking pools and centralization exchanges as well. According to Dune, liquid staking contributes almost 36% of the overall revenue of the network. It should be noted that ETH staking has gained huge traction since its launch. Back then, it didn’t gain traction as expected from the network. 

When Experts Asked ChatGPT About ETH Staking

Everything is getting an AI touch, including the crypto world. Some users asked ChatGPT about its view on ETH staking. Specifically, the question was, “Will the ETH staked supply forego 30% of the total circulation supply?” The AI bot resisted making solid statements, but it considered the growing impact of staking in ETH. 

Dipping Rewards of ETH 

The ETH staking is having its moment in the sun. However, it’s not doing any good to the rewards. On the contrary, the rewards are decreasing and disappointing many token holders. The volume of yield always corresponds to the number of stakes. The number of validators on this network has risen by more than 50% since Shapella. Despite that, the annualized financial return per validator has decreased. 

As it happens, the markets remain hopeful. The holders are expecting things to turn over in the next few months.

Nancy J. Allen is a crypto enthusiast and believes that cryptocurrencies inspire people to be their own banks and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning.

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