The cryptocurrency Ethereum successfully went through the so-called Shapella update on Wednesday night, which, in addition to minor optimizations, now enables staking participants to withdraw their deposits including interest. It was a hard fork that required decentralized network participants to migrate to newer versions of client software.
When Ethereum started its transition from Proof of Work (PoW) to Proof of Stake (PoS), participants could transfer an amount of Ether from the PoW chain at the time to the so-called Beacon chain and thus become the validator of new blockchain blocks. The beacon chain ensures consensus among PoS. Both chains (Ethereum PoW and Beacon Chain) worked independently at that time. The transfer of Ether to the Beacon Chain was only possible in one direction. So if you once deposited your deposit for staking with a sum of 32 ether, you could not get the deposit back.
In September 2022, both chains were merged. The update, known as Merge, replaced PoW as consensus and the PoS beacon chain did the productive work. Despite this, there was still no way for those who had deposited a staking deposit to get it back. The protocol update now delivered this.
Staking switch done, scaling remains a problem child
The developers behind Ethereum see the switch from the power-guzzling consensus process Proof of Work to Proof of Stake as complete. Ethereum co-inventor Vitalik Buterin explained in a live stream of the update: “We are in a phase where the hardest and fastest parts of the Ethereum protocol transition are basically complete. Very important things still need to be done, but this one very much Important things can certainly be done at a slower pace.”
Even if Ethereum’s power consumption has decreased due to PoS, the update does little to change Ethereum’s extremely moderate scalability. When many transactions are made on the network, processing fees sometimes skyrocket in excess of the value of the transaction. “If we don’t get the scaling issues under control before the next bull run, people will be stuck with $500 transactions,” Buterin warned.
Negative effects of the withdrawal option on the price of Ethereum’s currency token Ether have not been noticed so far. With Bitcoin’s momentum to $30,000, Ethereum had surged above $1,900 earlier in the week. Clear gains towards the $2,000 mark are evident this Thursday.
For technical reasons, it is not possible for many stakers to suddenly withdraw their crypto money and throw it on the market. Only 16 withdrawals from staking deposits are processed per block. The waiting time is just under 3.5 days for 400,000 pending withdrawals. With 800,000 withdrawals you have to reckon with almost seven days.
According to figures from the beaconcha.in service, a little over 20,000 ethers have been withdrawn from staking since the update. Around 16,000 of the 566,000 validators are therefore waiting to get out of the staking process. The equivalent of just under 18 billion US dollars is currently invested as staking deposits. Apparently, many people also use staking services such as those from the Coinbase and Binance exchanges. Here you can deposit smaller amounts than the 32 ether per validator. How the now free staking at Ethereum will develop remains to be seen in the coming days and weeks.
(sigh)
