Ethereum Validator Entry Queue Signals Renewed Interest in Staking

The Ethereum network is witnessing a spike in the number of validators looking to stake their ether (ETH).

The so-called validator entry queue has jumped to 7,045, the highest since Oct. 6, according to data source ValidatorQueue. The waitlist, representing over 225,000 ether ($562 million), is expected to be cleared in just over 48 hours.

Ethereum limits the number of new validators that can join the network per epoch or the time it takes to process blocks on the blockchain. This results in a backlog. An Ethereum epoch is 6.4 minutes long.

Validators are entities that stake a minimum of 32 ether in the network to participate in running Ethereum’s proof-of-stake consensus blockchain. In exchange for staking ether, they receive a steady rate of return analogous to interest income from fixed-income instruments like bonds.

“Resurgence in Ethereum staking activity indicates initial signs of renewed vitality,” David Lawant, head of research at institutional crypto exchange FalconX, said in an email on Friday.

Lawant added that the renewed uptick in the activation queue is notable, as there has been little to no improvement in the annualized percentage yield on staked ether.

CoinDesk’s composite ether staking rate continues to hover between 3.5% and 4% for the fourth straight month, offering barely any premium compared to the yield or the so-called risk-free rate of 4.17% on the 10-year U.S. Treasury note.

While the number of stakers looking to join the network has spiked, the tally remains well below the figures over 75,000 seen following Ethereum’s Shapella upgrade in April last year. The Shapella upgrade opened withdrawals of staked ether for the first time, de-risking the process of locking coins in return for rewards.

The waitlist for validators looking to exit saw a brief spike in early January after failed crypto lender Celsius revealed plans to unstake its entire ether holdings.

Ether jumped nearly 10% last week, underperforming bitcoin’s (BTC) 14.5% gain and the 11% rise in the CoinDesk 20 Index.

The uncertainty about the potential launch of U.S.-based spot ETFs later this year and the need for more clarity in the SEC’s categorization of ether have seemingly kept traders from aggressively buying ether.

According to Lawant, everyone is waiting to see whether the potential ETH ETFs will be allowed to stake coins.

“Ark/21Shares updated their S-1 form to include a staking component this week. The back and forth on S-1 amendments over the upcoming months ahead of the key date on May 23 will hint at whether that’s a real possibility,” Lawant noted.