An Upgrade to Slow Down Ethereum (ETH) Staking
Developers of the Ethereum (ETH) ecological system have announced that an upcoming upgrade, known as Ethereum (ETH) Cancun-Deneb (Dencun), will introduce a mechanism to adjust the network staking rate. The upgrade, scheduled for late October 2023, is divided into two parts: Deneb, focusing on the Consensus Layer, and Cancun, targeting the Execution Layer. As part of this upgrade, a proposition was known EIP-7514 will modify the ‘churn limit’ function to set an upper bound. The churn limit controls the number of validators allowed to join or exit the network within a specific timeframe. By reducing the churn limit, developers intend to address the economic and technical consequences of liquid staking more effectively.
“This proposition intends to mitigate the negative externalities of very high degree of total Ethereum (ETH) supply staked before a suitable solution is implemented.”
The core developers believe that slowing down the expansion rate of staked Ethereum (ETH) is necessary. Core developer Tim Beiko describes that this change will slow down the percentage increase of Ethereum (ETH) stake in the worst-case scenario. Dankrad Feist, another developer, outlines that reducing the churn limit will provide more time for research and implementation of solutions related to liquid staking.
Ethereum (ETH) Staking Outlook
The Ethereum (ETH) Cancun-Deneb upgrade likewise includes EIP-4844, which introduces Proto-Danksharding as a transitional phase towards full Danksharding. This function is expected to lower gas fees and increase transaction throughput by utilizing data “blobs.” Since April, the validator activation queue has consistently remained full after Ethereum (ETH) withdrawals were introduced.
Liquid staking has gained whole lot of popularity in the Ethereum (ETH) ecological system, with Lido dominating as it holds approximately one- third of all staked Ethereum (ETH). According to Beaconcha.in, the present total amount of Ethereum (ETH) staked is 25.4 Million, valued at around $41.5 billion.
Hot Take: Ethereum (ETH) Upgrade Aims to Address Staking Concerns
The upcoming Ethereum (ETH) Cancun-Deneb upgrade introduces changes to the network’s staking rate and churn limit to mitigate the capacity negative effects of high levels of staked Ethereum (ETH). Developers recognize the need for a slower growth rate in staked Ethereum (ETH) to allow time for research and implementation of solutions related to liquid staking. The upgrade likewise includes features like Proto-Danksharding, which aims to lower gas fees and increase transaction throughput. With the popularity of liquid staking on the rise, it is important to address these concerns proactively to secure the stability and sustainability of the Ethereum (ETH) ecosystem.
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