The total ETH locked on the Ethereum chain clocked a fresh all-time high of 27.03 million, representing a 40% jump since Shapella. While ETH staking has clearly grown in popularity over the years, it has, ironically, reduced the staking yields.
Shapella, which enabled withdrawals, marked an end to a two-year-long wait for users who began to lock their ETH holdings in the hopes of earning passive revenue from them.
Infact not just the staked ETH but any earned staking incentives could also be withdrawn thanks to the upgrade. This marked a complete transition from the proof-of-work to the proof-of-stake algorithm. As a result, individual holders who had been hesitant to deposit their money for an ambiguous period of time started to gradually stake more. These holders tested the unstaking mechanism in the first few days following the upgrade. This led to a significant uptick in withdrawal requests.
However, since then, deposits have consistently outpaced withdrawals. According to blockchain research firm Nansen, the total amount locked at the time of publication equated to 21% of ETH’s circulating supply.Interestingly, the increase in staked amount was in stark contrast to the depleting exchange supply of ETH. Since Shapella, ETH’s reserves across centralized exchanged have dipped more than 20% until press time.
The fascinating divergence reflected what could be the beginning of a long-term trend in the Ethereum market. More and more people were taking ETH out of the market and using it as an investment to earn yields. And even though staking rewards have progressively reduced over the past two years, the clamor for staking continues to surge.Apart from providing a fillip to staking, Shapella also unlocked new doors of opportunities for liquid staking tokens .
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