Shapella Upgrade, Regulatory Pressure Cause a Dip in ETH Staking

Shapella Upgrade is coming on April 12.
Regulatory pressure and the upgrade have caused a considerable dip in ETH staking.

The Shapella Upgrade coming on April 12, increased regulatory pressure has slowed the Ethereum staking considerably. On-chain analytics provider, Glassnode shared a report regarding the Ethereum staking ecosystem scenario on April 9, revealing the current state.

Deposit trends by staking providers have exhibited a clear shift over time with Kraken, Binance and Coinbase jousting for deposit allocations across the Beacon Chain’s early days.
As the dust settled between the three giants, it was Lido who emerged victorious, continuing to… pic.twitter.com/yp50NWQ5XJ
— glassnode (@glassnode) April 9, 2023

Ethereum Staking Scenario

The financial regulators in the United States are punching the crypto industry hard in the ring. As the Securities and Exchange Commission is trying to prove that Ether is a security, they have also lashed out at its staking. However, the legislation from Congress does not classify ETH as security.

The Ethereum network will undergo a much-awaited Shapella hard fork, better known as Shanghai hard fork, on April 12, allowing the phased release of ETH staked on Beacon Chain. The regulatory factors and the supposed upgrade have caused the staking rates to drop.

Glassnode also pointed out that major centralized exchanges like Coinbase and Kraken lost some market shares to Lido, the liquid stalking platform. Currently, Lido holds almost one-third of the ETH staked, which means it has around 5.9 million ETH worth $11 billion on its platform.

Entities Facilitating Stakers in the Ecosystem

Coinbase takes about 25% commission in the staking rewards; this fee is even higher when staking Cardano (ADA) or Solana (SOL). Lido, however, takes only a 10% commission and offers the possibility of earning additional yields on Decentralized Platforms via its staking toke Lido Staked ETH (stETH). This could be the major point why Lido is winning the race.

Analysts are saying that Lido might get an extra boost after the ETH is released after the Shapellla upgrade from the Beacon Chain.

Ultrasound.Money, the Ethereum metrics tracking platform, says there are about 18.1 million total ETH staked, which is around $33.7 billion and amounts to nearly 15% of the total supply. These staked ETH will be released slowly for withdrawal in weeks and months.

The Shapella upgrade promises that the stakers can un-stake their assets for withdrawals or re-staking. The amount of staked ETH in the ecosystem would be a massive task to handle the withdrawal. However, the withdrawals would depend on multiple factors, like where the ETH is staked, if they are in a liquid staking platform like Lido, etc.

The prior test results for the Shapella upgrade were not promising as there were problems with longer than expected transaction times, and some computers could not adjust to the new upgrade. Moreover, considering the project’s massive scale, the network must ensure it’s safe to handle this traffic.

Such massive traffic usually reveals vulnerability issues that the hackers can later exploit; this thing must be taken care of. However, the market sentiments are positive around the Shanghai upgrade/ Shapella upgrade; everyone hopes it will deliver on its promises.