Ethereum Network Winesses Over 25% of ETH Total Supply Staked
In Brief
For the first time, the supply of ETH staked on the Ethereum network surpassed 25% of the ETH total supply.
For the first time, the supply of Ethereum’s native token, ETH, staked on the Ethereum network—accounting for ETH currently in the network’s staking queue—has surpassed 25% of the total supply, represented by 942,023 individual validator stakes.
This milestone occurs nearly a year after the Ethereum Shapella upgrade, with the ETH supply exceeding 30.1 million, valued at approximately $73 billion. Following the upgrade, there has been a surge in ETH staking as users and validators gained the ability to withdraw their staked ETH on the network for the first time, resulting in a net flow of 10.25 million ETH being staked since the upgrade.
The observed increase is significantly influenced by the availability of liquid staking solutions, including Lido and Rocket Pool, which have streamlined the staking process. These solutions enable staking for amounts less than 32 ETH, concurrently unlocking the value of staked assets for use as collateral in decentralized finance (DeFi).
However, there has also been a significant decline in the staking rewards offered, primarily attributed to increased participation in staking, which generally results in lower rewards per staker. According to data from Beaconcha, the staking rewards rate has decreased from its post-Shapella peak of 8.6% to currently stand below 4%.
Ethereum’s Staking Landscape Decentralization Concerns
Dune Analytics data shows that validators associated with Lido Finance presently contribute to over 31% of the ETH stakes. This has raised previous concerns about the potential impact on the network’s decentralization and security due to the concentration of staked ETH within a single service.
However, users maintain the flexibility to transition to alternative staking solutions, akin to miners shifting mining pools in proof-of-work blockchains. Following Lido, the centralized crypto exchange Coinbase’s staking service holds the second position, contributing to 14% of the total ether staked, while Binance secures the third position with a 4% share.
Centralization by any entity or protocol introduces risks to the Ethereum network, as analysts from JPMorgan emphasize. A concentrated number of liquidity providers or node operators could potentially act as a single point of failure, making them susceptible to attacks or collusion and thereby posing the risk of forming an oligopoly.
Recently, Ethereum co-founder Vitalik Buterin has previously acknowledged that node centralization stands as one of Ethereum’s primary challenges. Speaking during Korea Blockchain Week last year, he indicated that devising a comprehensive solution for this issue might require an additional 20 years.
The recent Ethereum milestone in the evolving staking landscape represents both opportunities and challenges, emphasizing the ongoing importance of decentralization.
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Alisa is a reporter for the Metaverse Post. She focuses on investments, AI, metaverse, and everything related to Web3. Alisa has a degree in Business of Art and expertise in Art & Tech. She has developed her passion for journalism through writing for VCs, notable crypto projects, and scientific writing. You can contact her at alisa@mpost.io
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Alisa is a reporter for the Metaverse Post. She focuses on investments, AI, metaverse, and everything related to Web3. Alisa has a degree in Business of Art and expertise in Art & Tech. She has developed her passion for journalism through writing for VCs, notable crypto projects, and scientific writing. You can contact her at alisa@mpost.io
