Is Ethereum Being Ignored by Validators?

Ethereum Fails to Attract Validators: Recent statistics have shown that Ethereum is no longer a strong magnet for validators, which has surprised many crypto observers.

Is Ethereum Becoming Less and Less Attractive?

Last June, the developers of Ethereum came up with a brilliant idea to revolutionize the blockchain. In their view, capping the MAX_EFFECIVE_BALANCE at 2,048 ETH, at that time set at 32 ETH, would enable instant composition of rewards and reduce the number of validators.

 Ethereum's validator queue is finally clearing out!  As the demand for staking declines, this opens up exciting opportunities for new validators to join the network.  Don't miss your chance to be part of the #Ethereum revolution!  #CryptoNews #BlockchainTechnology #NFTs… pic.twitter.com/ZwCQnJJ4qs

— ⚡ Mr. Crypto Giants🐋 (@CryptoGiants_) October 12, 2023

While crypto influencer Mr. Crypto Giants thinks so, Coinjournal sees a rather paradoxical situation compared to the track record of this popular blockchain. Yesterday, the Ethereum queue comprised just 377 validators, the crypto media outlet points out.

At the beginning of the month, however, the list peaked at 96,000 validators.

What can we make of this significant drop? It’s akin to a reduction in demand for Ethereum staking. At one time, candidate validators on the same network complained about the slow approval of their applications: 45 days waiting time. In addition, they were confronted with ETH staking application rejections.

Nevertheless, Validator Queue data revealed a major improvement in waiting times. Instead of the 45 days mentioned above, the duration has dropped drastically by 4 hours.

That’s high praise for Ethereum’s spectacularly successful Shapella upgrade in mid-April 2023. Shapella, a contraction of Shanghai and Capella, represents the final stage in the blockchain’s transition from Proof-of-Work (PoR) to Proof-of-Stake (PoS).

ETH Staking Rewards Decrease

Shapella therefore represents a crucial milestone for Ethereum. Some analysts firmly believe that its advent will coincide with an ETH bull run of up to $5,000. Moreover, a few days after the announcement, CoinShares spoke of an increase in institutional investor interest in the Ethereum blockchain thanks to Shanghai-Capella.

“Ethereum saw inflows totaling $17 million last week, suggesting that investors are increasingly confident following the implementation of Shapella,” CoinShares had concluded on April 24.

Which seems entirely logical, given that The Merge, Ethereum’s successful September 2022 upgrade, opened up several exits for ETH investors.

But this drop in staking demand is worrying some observers. It has led to a reduction in staking rewards. Whereas at the beginning of the year, the figure was 5-6%, it has now fallen to 3.5%.

In other words, the Ethereum network’s fee-generating activities have also fallen, and its staker numbers have risen.