Ethereum Validator Queue Hits Zero: Is This a Warning Sign for Staking? 

Concerns are being raised on social media that the demand for staking Ethereum (ETH) is diminishing. 

This coincides with the landmark shift in the waiting time to be able to stake Ethereum. For the first time, the queue time is under 1 hour. To give some perspective, following the Ethereum Shanghai upgrade earlier this year, it took up to 45 days to enter these validator nodes and start earning rewards.  

The Shanghai upgrade allowed stakers to withdraw their ETH for the first time in history, an event that caused a demand spike for Ethereum staking.  

What Caused This Sudden Drop? 

21 Shares analyst, Tom Wan shared notes on X that the Ethereum staking churn limit increased from 12 to 13. This limit refers to the number of validators that can join or leave the network within a certain period of time. This significantly increases the threshold for the amount of ETH that can be deposited into staking validators.

Update on Ethereum Staking

1. The Churn Limit has Increased to 13 per Epoch
The number of validators on Ethereum reached 854k on 10 Oct. As a result, the activation limit and exit limit per epoch have increased from 12 to 13, which means ~2,925 validators can exit or withdraw… https://t.co/QuHsocmlBz pic.twitter.com/nxb2iBD3HA

— Tom Wan (@tomwanhh) October 13, 2023

Pair this with an overall decreasing demand since May 2023. As the chart below shows, we have not seen a shift or flattening of this trend.  

Amount of ETH Staked Weekly

There are Still More Deposits than Withdrawals 

Despite mostly bearish sentiment so far in 2023, the ETH network is still growing in the amount of ETH staked as a reflection of total market supply. This would suggest that withdrawals are still not seeing any change in trend.  
 

The Ethereum Foundation is Worried About Over-Staking 

Whilst these reports of Ethereum’s diminishing staking demands have garnered attention, Ethereum’s developer community has expressed their concern over the rapid growth rate of staked Ethereum since its inception.  

According to a report on the Ethereum.org website, there is a possibility that 100% of the Ethereum supply could be staked by December 2024. System strain is a real concern if this scenario plays out, due to the large amounts of operational data the network would need to handle.  

The unprecedented adoption rates of liquid staking ETH derivative products further bolster these concerns. Liquid staking giant Lido Dao currently accounts for 31.8% of the total ETH staked presently.  

What Should Potential Stakers Be Aware of? 

Taking everything into account, nothing has changed. Network stability is unchanged, deposits still outweigh withdrawals, and the overall demand for depositing ETH has been on the decline since mid-2023. However, the current end-user experience of depositing and withdrawing from staking pools has been improved, with wait times no longer being a blocker.  

Speaking long term, the Ethereum Foundation does seem to need to decide on how to prevent the scenario of 100% of total ETH being staked, as that’s been identified as a problem. Currently, EIP-7514 has been suggested for review by the community, looking to introduce a linear limit to the amount of ETH that can be added or removed each epoch.