In recent weeks, a significant shift was observed in the dynamics of the Ethereum staking pool, marked by a slowdown in the growth rate of validators.
This trend led to a decrease in the daily issuance of Ethereum (ETH), which is directly linked to the amount of active ETH within the staking pool. Despite this deceleration, the overall landscape indicates an increase in network activity, driven by renewed interest in tokens and stablecoins.
The growth rate of the #Ethereum validator set has slowed in recent weeks as an increasing number of validators voluntarily exit, slowing the rate of ETH issuance.
Alongside increasing ETH burnt via EIP1559 due to growing network activity, the ETH supply has turned… pic.twitter.com/xMrQRe7opO
— glassnode (@glassnode) November 28, 2023
A notable event during this period was the agreed resignation of Binance CEO, CZ, with a $4.3 billion settlement with authorities. This event marks a possible end to the ‘wild west’ era in the digital asset industry. The market reaction was moderate, with a 9.1% decline in the price of BNB, compared to more pronounced drops in previous occurrences.
Ethereum Responds and Adapts
Regarding the Ethereum landscape, the noticeable increase in validator exits, especially since October, was remarkable. This exodus, mostly voluntary, involved prominent players like Kraken and Coinbase, as well as liquid staking providers like Lido. The phenomenon contributed to a slowdown in the growth of the total effective balance in the staking pool, marking the first decline since the Shanghai upgrade.
Despite these exits, some exchanges, including Kraken and Coinbase, experienced a recovery in their balances after CZ’s resignation, indicating a level of trust from users in these platforms.
Furthermore, the change in ETH issuance goes hand in hand with an increase in the daily burning of ETH fees through EIP1559. This fee-burning mechanism, initiated with the London upgrade in 2021, resulted in a situation where the ETH supply once again becomes deflationary. This change was supported by an increase in gas fees, indicating a growing demand for transactions on the Ethereum network.
In terms of specific activities contributing to the supply burn, token transfers and the use of stablecoins grew significantly compared to NFT and DeFi transactions, which decreased in contribution over the last four months. The dynamic nature of the Ethereum network is evident in its ability to respond to trends in market activity.
