Data from a research firm has revealed that nearly 80% of Ethereum staking rewards have been withdrawn since the Shanghai update.
1.5 million ETH have been withdrawn in total since the Ethereum Shanghai upgrade
In September 2022, Ethereum finally switched to a Proof-of-Stake (PoS) consensus mechanism. In such a system, a consensus on the blockchain is achieved through the participants and not the miners.
Anyone can become a participant if they deposit 32 ETH in the participation contract. While the mainnet only transitioned to the PoS system in September 2022, as mentioned above, the staking contract had already been active on a test blockchain since November 2020.
This means that holders have been depositing into the contract and earning staking rewards ever since. However, until the recent Shanghai update, there was a limitation attached to this contract for all those years.
While the deposit functionality was in place, investors were still unable to withdraw their coins from the contract. For this reason, a large number of rewards were accumulated with validators while this restriction was maintained.
The Shanghai update released earlier in the month allowed investors to withdraw their locked ETH and staking rewards. Since the rewards had accumulated in the contract over all these years, it was expected that there would be a lot of withdrawals when the update was rolled out.
According to a new publication from Investigation K33 (formerly Arcane Research), almost 1.5 million ETH ($2.8 billion) has been withdrawn since April 12, 2023, when the hard fork occurred. The pie chart below shows the split of these withdrawals between full and reward only.
The withdrawals that have taken place since the Shanghai upgrade | Source: K33 Research
“Full withdrawals” here refer to withdrawals that involve the full output of the 32 ETH stack that the validator had to include in the share contract at the beginning (this means that after this type of withdrawal, the investor no longer is still a validator).
Only around a third of the total withdrawals were of this type (around 462,468 ETH); the other two-thirds involved only the outflow of staking rewards (891,916 ETH).
Now, here’s a chart that breaks down how these reward withdrawals that have taken place since Shanghai compare to the accumulated rewards that haven’t been touched yet:
Looks like a majority of the rewards have already been withdrawn | Source: K33 Research
As shown in the graph above, the Ethereum staking rewards that have been withdrawn since the Shanghai update went live far exceed those that are still being withdrawn. More precisely, around 80% of the total rewards accumulated before the hard fork have already been withdrawn.
From the graph, it is also evident that the rewards accumulated in the last seven days have been minuscule compared to those previously accumulated.
This would suggest that any extraordinary selling pressure coming into the market from the start of these pullbacks should be almost completely exhausted by now. The same pressure would not be maintained in the future due to the slow pace of new rewards being distributed among Ethereum validators.
ETH price
As of this writing, Ethereum is trading around $1,800, down 8% over the past week.
ETH has plummeted recently | Source: ETHUSD on TradingView
Featured Image of Kanchanara on Unsplash.com, Charts from TradingView.com, K33 Research
