Crypto technology is constantly evolving to maintain its relevance. In the case of the Ethereum network, an upgrade planned for the end of October 2023 aims to moderate the growth of the ETH staking rate. This change primarily focuses on reducing the churn limit needed to manage staking. It thus responds to concerns regarding the potentially harmful economic impact of the high staking rate of the crypto ETH.
Dencun – A Two-Part Upgrade
According to the developers, the upgrade is divided into two parts: Deneb and Cancun. The first focuses on the consensus layer while the second on the execution layer. The churn limit regulates the number of validators allowed to join or leave the Ethereum network within a specified time frame. Thus, the developers intend to reduce it in order to obtain more time to manage the technical consequences of staking liquidity.
According to developer Dankrad Feist, it is unclear whether liquid staking will continue to increase indefinitely. Radical measures become necessary if we do not lower the unsubscribe rate limit now, he explains. Indeed, according to lead developer Tim Beikothis would slow down the rate at which Ethereum staking percentage increases.
EIP-4844: new perspectives for Ethereum staking
The upgrade also includes the EIP-4844. This is a core feature called Proto-Danksharding. The latter is a transitional phase towards complete Danksharding. EIP-4844 aims to modify the churn limit function to reduce it to a maximum value. By using “blobs” of data, developers hope to reduce gas costs. They also hope that transaction throughput increases with this change.
Additionally, the validator activation queue has remained consistently full since the introduction of ETH withdrawals in April. With around a third of all Ethereum cryptos staked, Lido dominates this market. According to Beaconcha.in, 25.4 million ETH tokens are currently staked. This represents a value of approximately $41.5 billion at the current price of Ethereum.
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