- The Ethereum validator output queue has been cleared.
- It removes the headaches associated with liquid staking protocols.
- The queue to launch new Ethereum validators is also growing.
After four long months, the Ethereum validator output queue no longer exists.
The key security mechanism became clogged in September after Kiln, a major Ethereum player, removed its entire fleet of validators from the network after hackers exploited a vulnerability in the platform’s staking infrastructure.
The backlog delayed staking withdrawals by several weeks at its peak, causing numerous headaches for Ethereum Staking Protocols, platforms that offer to stake Ether tokens to users in exchange for a small fee.
Today, these protocols celebrate the return to normal.
Liquid staking tokens, which look like receipts on staked Ether, are now less likely to trade at a discount, said Kirill Kutakov, co-founder of liquid staking protocol Stakewise. DL News.
Crypto markets incorporate so-called duration risk caused by a clogged Ethereum output queue. Queue length spikes can amplify discounts on liquid staking tokens, as those purchasing them must wait longer until they can redeem them for the underlying Ether they represent.
A smooth release queue is also a good thing for the broader DeFi ecosystem. It is now simpler and cheaper for those using leveraged Ethereum staking strategies to unwind their positions, leading to more efficient trading, Kutakov said.
Why is there a queue?
Ethereum’s output queue is a necessary element of blockchain security.
The mechanism limits the speed at which Ether can leave the network based on the total amount staked. Currently, it is set at around 57,600 tokens each day.
This helps avoid rapid changes to Ethereum’s set of validators, the ones that run the software that stakes Ether and processes transactions on the network. Each validator must lock at least 32 Ether tokens, up to a maximum of 2,048.
A sudden drop in the number of validators could make the network more vulnerable to attacks. The delay also prevents validators from exiting immediately if they misbehave, thereby discouraging abuse.
The cleared exit queue also comes as a relief to Rocket Pool, the third-largest Ethereum liquid staking protocol, which holds $1.8 billion worth of staked Ether.
Rocket Pool node operators will have a much easier time redeploying their validators after the next Saturn upgrade scheduled for February 9, said Darren Langley, the protocol’s chief executive officer. DL News.
Increased staking flows
As the release queue decreases, the queue to launch new Ethereum validators is also increasing at a rapid rate.
Since December 24, the number of Ether tokens entering the queue has jumped nearly 300% to over 1.7 million. New validators entering the queue now have to wait more than 30 days before they can join the network, according to data from Beaconcha.in.
BitMine, the world’s largest Ethereum treasury company, is responsible for much of the new Ether being staked. The company began staking on December 26 and has since staked 936,512 Ether worth approximately $2.9 billion, per on-chain record.
BitMine President Tom Lee has repeatedly expressed his intention to purchase and stake 5% of the entire Ether token supply.
The company currently holds just over 4 million Ether, about 67% of the way toward its goal.
Tim Craig is DL News’ DeFi correspondent based in Edinburgh. Contact us with advice at tim@dlnews.com.
