Ethereum’s validators are facing an unexpected hurdle as they find themselves waiting for several days to withdraw their staked ether (ETH). The culprit behind this delay appears to be the defunct crypto lender Celsius, which is in the midst of a restructuring process following its bankruptcy filing in 2022.
Validators play a crucial role in securing the Ethereum network by staking ETH in exchange for a steady interest rate. However, there’s a catch – there’s a cap on the number of validators that can unstake their tokens each day, leading to the current backlog.
As of Friday, the exit queue for Ethereum validators soared to over 16,000, a significant jump from the 26 reported the previous day, according to data from validatorqueue.com. This backlog represents more than $1 billion worth of staked ETH at current prices. Unfortunately, due to the backlog, it could take up to 5.6 days for these ETH holdings to be returned to their depositors.
The prominent player in this scenario is Celsius, which seems to be a primary contributor to the delays. On Thursday, Celsius acknowledged on the platform formerly known as Twitter that “significant unstaking activity in the next few days will unlock ETH to ensure timely distributions to creditors.”
According to blockchain analytics firm Nansen, 32% of all ETH waiting to be withdrawn is linked to Celsius, while another 54.7% is associated with Figment, a staking service reportedly utilized by Celsius.
It’s not the first time Ethereum validators have faced extended wait times. In April, validators experienced waits of up to 17 days to retrieve their staked ETH following the Shapella upgrade, which allowed for staked ETH withdrawals for the first time. Back then, around 28,000 validators were in line to leave the network at one point.
Although exit requests from the blockchain diminished significantly since then, the current scenario highlights the challenges that can arise unexpectedly. Ethereum validators, once again in the spotlight, find themselves navigating through a backlog, showcasing the intricacies and potential hiccups in the blockchain ecosystem.
Celsius will unstake existing ETH holdings, which have provided valuable staking rewards income to the estate, to offset certain costs incurred throughout the restructuring process— Celsius (@CelsiusNetwork) January 4, 2024
As the Ethereum community grapples with these challenges, it underscores the need for continuous monitoring and adaptive measures to ensure the smooth operation of the network. The interconnected nature of the crypto space means that events involving one entity, such as Celsius, can have ripple effects across the broader Ethereum landscape.
In conclusion, the current delay in Ethereum validators’ unstaking process sheds light on the dynamic and interconnected nature of the cryptocurrency ecosystem. While challenges like these may cause temporary disruptions, they also present opportunities for the community to enhance the resilience and efficiency of the blockchain network.