The number of Ethereum (ETH) holders choosing to stake (effectively locking their tokens in a smart contract platform) is declining. According to CryptoQuant dataAs of August 23, staking inflows totaled 30,656, down from the 404,704 registered on June 1.
Ethereum staking inflows decline, but number of active validators exceeds 813,000
Total staking inflows, which measures the number of unique addresses transferring tokens to official Beacon Chain deposit addresses for staking purposes, have steadily increased from approximately 5,952 on April 3 to 404,704 on June 1.
The data shows that this peak received a significant boost with the activation of the Shapella upgrade on April 12. For example, between April 12 and June 1, total staking inflows rose from 16,736 to 404,704, an increase of more than 25 times.
The Shapella upgrade allows Ethereum validators to withdraw their tokens for the first time since the lockdown began in late December 2021. This update gives validators, who are responsible for validating transactions and keeping the network secure, the option to continue staking their tokens or exit.
However, according to Dune analysisAs of early September 2023, the number of validators increased from approximately 568,000 on April 12 to more than 913,000.
In September 2022, Ethereum shut down the proof-of-work consensus protocol to verify whether transactions comply with the proof-of-stake consensus. Ethereum now no longer relies on miners, but on validators. At the time of writing, there are over 813,105 active validators in total, locking Over 26 million ETH.
Will this make Ethereum centralized?
The 92% reduction in the number of pledges is worrying. However, this does not necessarily mean that the Ethereum network is now vulnerable or flawed.
Specifically, while the metric tracks the number of ETH holders who have chosen to stake on Ethereum and earn rewards, the tracker does not disclose the number of people who have withdrawn during this period.
A sharp increase in the amount of ETH unlocked (as shown by the number of validators deactivating nodes) or choosing not to validate transactions could be cause for concern. This could leave the network facing centralization concerns as liquidity staking providers such as Lido Finance become increasingly popular following the April 12 Shapella upgrade.
To quantify, Lido Finance is a dominant decentralized finance (DeFi) protocol with a total value locked (TVL) of Exceed At the time of writing on September 22, $13.9 billion was funneling hundreds of thousands or even millions of ETH from holders, allowing them to earn staking rewards.
Feature images from Canva, charts from TradingView
