The Ethereum network is experiencing a surge in validator exits, with the number of validators in the exit queue reaching an all-time high of over 16,000 on January 5, according to on-chain data.
As churn increased, unstaking wait times jumped to an average of 5.6 days. As of press time, approximately 15,140 validators are still in the queue.
The surge was mainly driven by withdrawal requests from defunct CeFi lender Chelsea Network and staking provider Figment, which accounted for around 75% of all withdrawals in the queue.
550,000ETH
Celsius, which is currently undergoing restructuring procedures after declaring bankruptcy last year, has begun a large-scale withdrawal from Ethereum staking.
The move, aimed at redistributing assets to meet creditors’ demands, includes the withdrawal of over 200,000 ETH, worth approximately $450 million.
The situation was made even worse by the intervention of Figment, another major staking provider, which was tied to 54% (350,000 ETH) of the total withdrawals in the queue.
Together, the two organizations want to withdraw approximately 550,000 staked Ethereum. This represents approximately 1.7% of the 29 million ETH staked across all platforms.
Items are drying out
Even amid this significant churn, the entry queue for new Ethereum validators remains noticeably low, close to zero. This is in stark contrast to the swelling numbers in exit queues.
The Ethereum network operates with exit restrictions, which limits the number of validators who can enter or leave the network per day to 2,925, based on 13 validators per epoch.
The surge in withdrawal requests also affected the staking returns of Ethereum validators. As of press time, the staking reward reference rate was approximately 3.4%, down more than 50% from the nearly 8% return recorded in May 2023.
This significant change in validator dynamics poses potential challenges to the stability of the Ethereum network, given the critical role of validators in securing and processing transactions.
Meanwhile, unstaking wait times have lengthened to an average of 5.6 days, raising concerns about the network’s ability to handle large-scale exits.