Weekly Commentary: Leaving So Soon?

Since the Shapella update enabled withdrawals of staked ETH balances from the Beacon chain, we have seen over 1 million ETH unstaked. The majority of this ETH was withdrawn partially, where only the ETH above the 32 ETH minimum is removed. However, nearly 25% of the total was taken in a full withdrawal, wherein validators halt their validating duties entirely. So far, withdrawals of this type have been limited and occurred over only a few days before tapering off. However, there are still 6K nodes that have completed the necessary exit checks to perform such a withdrawal at a moment’s notice.

Bacon Chain Withdrawals

Figure 1 Beacon chain deposit (blue) and withdrawals (partial in yellow, full in red) (left axis) and Total ETH Locked on the Beacon chain (right axis) in blue line. Source: Block Scholes

• The Beacon chain saw large amounts of ETH withdrawn following the activation of withdrawals on the 12th April.
• Partial withdrawals (withdrawals of balances above the 32 ETH minimum required to run a node) were the dominant withdrawal type until the 15th April.
• That date saw the largest daily amount withdrawn, with full withdrawals (and resignation from validating duties) representing the bulk of ETH leaving the chain.
• Whilst the days since have seen drastically fewer validators remove their full balance from the Beacon chain, there are still nearly 6K nodes that have stopped validating and are able to withdraw by joining the 16-withdrawals-per-block queue.

Distribution of Beacon Chain Withdrawals

Figure 2 Pie chart illustrating the distribution of withdrawal types (in % of total ETH withdrawn. Full in red, partial in blue), with the largest single withdrawers highlighted, and addresses withdrawing less than 2K ETH aggregated into “Other Addresses”. This snapshot was taken at 14:24 UTC 18/04/23. Source: Block Scholes

• The majority of the ETH withdrawn thus far has been sent to only a handful of addresses, with an address belonging to Lido (a liquid staking protocol) being the largest accumulator of ETH.
• The vast majority of withdrawals performed by this address were partial withdrawals, meaning that those validators will continue their validating activities on the Beacon chain.
• That large address currently holds over 260K ETH ($544M).
• An increase in Beacon chain deposits was also observed following the successful implementation of the Shapella upgrade, with investors now being confident that they have access to their ETH.
• The days following the unlock say up to 10 times more ETH being deposited compared to the days leading into the unlock.

Validator Positions

Figure 3 (a) Validators who have fully exited the Beacon chain and are able to withdraw their full Beacon chain balances (b) Instantaneous counts of validators who are still actively validating the Beacon chain, but have signalled their intention to stop withdrawing and exit the Beacon chain. Source: Block Scholes

• Since the Shapella upgrade, the number of validators able to fully withdraw their tokens increased.
• These validators had, at some point in the past, signalled their intentions to leave the Beacon chain.
• We also saw a large increase in the number of active validators who signalled their intention to exit the Beacon chain.
• These are validators who signalled their exit only after they noticed that the Beacon chain was successfully processing withdrawals.
• These 20k validators will eventually exit the Beacon chain and can fully withdraw their full Beacon chain balances once they have completed the mandatory checking process.