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- Following the Ethereum Shanghai upgrade, less than 5 percent of validators have withdrawn their funds.
- Of this, a single entity represents 80 percent of the total withdrawals.
Ethereum recently implemented the Shanghai upgrade to complete its transition from the Proof of Work to the Proof of Stake algorithm. This is a very important development as it enabled investors to withdraw their staked ETH. Many expected a wave of staked ETH withdrawals, raising concerns about the possible impact on the price.
According to CoinShares, less than 5 percent of validators have so far withdrawn with 19,500 validators currently in the queue. This indicates that there would be a waiting time of almost 12 days until they all withdraw. In the deposit queue are 7,800 validators, and have a waiting time of almost 4 days.
(4/7) The vast majority of withdrawals is @krakenfx (~80%) as the @SECGov forced them to shutter their staking service for US customers. pic.twitter.com/WaZPKWBKQJ
— CoinShares (@CoinSharesCo) April 20, 2023
CoinShares has also noted that the majority of the withdrawals, over 80 percent, were triggered by the Kraken exchange. It can be recalled that the US Securities and Exchange Commission recently ordered the exchange to shut down its staking services for US customers. The exchange was charged for offering and selling their crypto asset staking-as-a-service program without going through the appropriate registration.
In response to this, Kraken paid $30 million disgorgement to settle SEC’s charges. Kraken was the third largest validator of Ethereum transactions with around 9 percent market share of the 16.7 million ETH locked in a smart contract network.
Provisions made for validators to exit from Ethereum staking
As of March, the amount of Ethereum staked on the PoS Beacon chain was more than 16.7 million ETH or more than $27 billion via over 520,000 validators.
Whether a given validator is eligible for a withdrawal or not is determined by the state of the validator account itself. No user input is needed at any given time to determine whether an account should have a withdrawal initiated or not—the entire process is done automatically by the consensus layer on a continuous loop.
Ethereum has also made provisions for validators seeking to exit staking entirely. The process takes some time and usually depends on the number of people exiting at the same time. Upon completion, the account would no longer be able to perform validator network duties, and would no longer be eligible for a reward.
In this case, the account will be marked as fully “withdrawable.” Once this is done, and the withdrawal credential is provided, users would have to wait.
Providing a withdrawal address is required before any funds can be transferred out of a validator account balance. Users looking to exit staking entirely and withdraw their full balance back must also sign and broadcast a “voluntary exit” message with validator keys which will start the process of exiting from staking. This is done with your validator client and submitted to your beacon node, and does not require gas.
Ethereum is currently trading at $1,920.08 after falling by 1.7 percent in the last 24 hours.
