Saturday, May 25, 2024

Celsius Network’s $800 Million Ether Staking Strategy Change Stretches Ethereum Validator Queue – Here’s What You Need to Know

The long wait to activate new validators on the Ethereum network has been made worse by the recent adjustments in the ETH staking strategy made by the now-defunct crypto lender Celsius Network.

Following the redemption of almost $813 million in staked Ethereum from Lido Finance, Celsius moved ETH into staking contracts over the course of two days. Based on information from Arkham Intelligence, the corporation has deposited $745 million in ETH since the beginning of June.

The transfers have extended the already lengthy line to add new validators to the Ethereum network, according to Tom Wan, an analyst at 21Shares, a product manager for cryptocurrency investments.

“The entire activation queue would take 45 days and 4 hours to clear if Celsius decided to stake all 428k ETH,” he stated. “Basically, the queue is extended by 6 days and 15 hours.”

With Celsius potentially holding the apex for nearly a week, the extended waitlist for new validators on the Ethereum network currently stands at 44 days.

With Ethereum’s Shanghai upgrade enabling withdrawals from staking contracts in April, the lender reorganized its staked ETH holding, which is why the latest transactions occurred.

Approximately 460,000 ETH, valued at $870 million, were held by Celsius at the time and were staked with Lido Finance. Approximately 160,000 tokens, valued at $300 million at the time, were placed in its staking pool.

Following the company’s July bankruptcy filing and sale to Fahrenheit, an investment group supported by Arrington Capital, these movements took place as the company restructures.

As previously mentioned, in mid-May, Celsius used the staking platform Figment to stake about $75 million worth of Ethereum.

According to on-chain data, the large transfer of 40,928 ETH from Celsius to Figment was accomplished through fourteen different transactions between May 10 and May 12.

According to statistics from Arkham, the company had invested over $12 million in the Celsius staking pool and had staked roughly $199 million of ETH via Figment at the time of writing.

After the transfers, Arkham calculated that Celsius wallets still contained about $109 million of ETH.

Celsius Staking Extends Ethereum Queue

An already packed line of users trying to add new validators to the Ethereum network has become much more strained as a result of Celsius’s recent action.

Validators, entities in a proof-of-stake blockchain, supervise transactions and have an impact on network security in return for tokens staking.

Since the April 12 activation of code allowing ETH staked in the Beacon Chain to be withdrawn, as part of the Shanghai upgrade, the demand for staking has skyrocketed.

According to data from blockchain analytics company Nansen, deposits increased by almost $5.5 billion when compared to withdrawals, forcing new users to wait a month to set up validators.

When the prices of the majority of the market’s major cryptoassets plummeted in the summer of 2022, Celsius Network failed.

As its own depositors sought to remove their money from Celsius, it is thought that a major contributing factor in Celsius’ collapse was its inability to extract the ETH it had staked and locked via staking services like Lido Finance.

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