Ethereum Core Developers Approve EIP-7514 for Dencun Upgrade
Ethereum Core Developers have given the green light to EIP-7514, which will be included in the upcoming Dencun upgrade scheduled for late 2023. This Ethereum Improvement Proposal aims to slow down the growth rate of ETH staking, allowing more time for the Ethereum community to develop an improved validator reward system.
Main Modification of EIP-7514
The key change introduced by this EIP is setting a constant value of 8 as the Max Epoch Churn Limit, which determines the upper limit of the validator activation queue. Previously, the churn limit was calculated based on the total number of validators divided by 65536, resulting in about 12 per epoch at present.
Importance of the Approval
Dankrad Feist, a Researcher at the Ethereum Foundation, emphasized the significance of approving EIP-7514. Feist explained that if the withdrawal queue doesn’t empty in the next few months, the lower churn limit will give the Ethereum community time to research and implement solutions.
Implications for Ethereum Price
The continuous rise in the staking ratio may lead to a scarcity of liquid ETH available for trading. While this could positively influence the ETH price, Ethereum developers are cautious about potential technical and security implications. The immediate impact on price is not expected, but any influence would likely occur over a longer period.
Motivation Behind EIP-7514
The motivation behind EIP-7514 is to address the negative effects of a high level of total ETH supply staked before a proper solution is implemented. If the deposit queue remains full, the proportion of staked ETH supply will reach 50% by May 2024, 75% by September 2024, and 100% by December 2024.
EIP-7514 serves as a temporary measure to buy time for the community to develop comprehensive solutions to emerging challenges in staking and supply management.
Long-Term Implications
While the immediate impact on the ETH price is uncertain, the long-term implications of EIP-7514 in terms of staking growth and supply side management could be significant. The community and investors will closely monitor the effects of this EIP’s implementation in the Dencun upgrade.
ETH Price Momentum
Currently, ETH is trading at $1,628. To maintain upward momentum, it is crucial for ETH to break above the 20-day EMA at $1,639 and the 61.8% Fibonacci retracement level at $1,665.
Hot Take: Ethereum Core Developers Approve EIP-7514 to Decelerate ETH Staking Growth
The Ethereum Core Developers’ approval of EIP-7514 for inclusion in the Dencun upgrade marks an important step in managing the growth of ETH staking. By setting a constant churn limit, this improvement proposal provides more time for research and implementation of solutions. While its immediate impact on the ETH price is not expected, the long-term implications are substantial. The approval highlights the community’s commitment to addressing challenges in staking and supply management. As Ethereum continues to evolve, investors will closely observe how these changes affect the overall ecosystem.
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