Celsius Network’s $800 Million Ether Staking Strategy Change Stretches Ethereum Validator Queue – Here’s What You Need to Know

Now-defunct crypto lender Celsius Network has caused a stir with changes in its ETH staking strategy, exacerbating the already elongated queue to activate new validators on the Ethereum network. 

Over a period of two days, Celsius transferred ETH into staking contracts after redeeming nearly $813 million of staked ETH from Lido Finance. The company has deposited $745 million of ETH since early June, according to data provided by Arkham Intelligence. 

Tom Wan, analyst at crypto investment product manager 21Shares, noted that the transfers have stretched the already long queue to establish new validators on the Ethereum network. 

“If Celsius decided to stake all the 428k ETH, it would take 45 days and 4 Hours to clear the whole activation queue,” he said. “Essentially adding 6 Days & 15 hours to the queue.”

The elongated queue to establish new validators on the Ethereum network now stands at 44 days, with Celsius potentially responsible for almost an additional week. 

The recent transactions follow the lender’s move to reshuffle its staked ETH holding since Ethereum’s Shanghai upgrade enabled withdrawals from staking contracts in April. 

At that time, Celsius held around 460,000 ETH, worth $870 million, staked with Lido Finance, while around 160,000 tokens, about $300 million at current prices, were deployed in its own staking pool. 

These transfers occurred as the firm undergoes restructuring after filing for bankruptcy protection in July, followed by its sale to Fahrenheit, an investment group backed by Arrington Capital.

As reported, Celsius staked close to $75 million worth of ETH via the staking service Figment in mid-May. 

On-chain data shows that the massive transfer from Celsius to Figment was made via fourteen separate transactions made between May 10 and 12, and totaled some 40,928 ETH.

At the time of publication, the firm had staked about $199 million of ETH via Figment and deposited about $12 million in the Celsius staking pool, according to data from Arkham. 

Celsius wallets still held approximately $109 million of ETH following the transfers, Arkham estimated.

Celsius Staking Extends Ethereum Queue

The recent move by Celsius has further stressed an already crowded queue of people attempting to add new validators on the Ethereum network. 

Validators, who are entities in a proof-of-stake blockchain, affect network security and oversee transactions in exchange for a reward by staking tokens. 

Demand for staking has increased dramatically since the Shanghai upgrade, which included code allowing withdrawals of ETH staked in the Beacon Chain, activated on April 12.

Compared with withdrawals, deposits rose by nearly $5.5 billion, leaving new entrants to wait a month to set up validators, according to data provided by blockchain intelligence firm Nansen. 

Celsius Network collapsed in the summer of 2022 as prices of most major cryptoassets crashed in the market.

It is believed that a key part of Celsius’ collapse was its inability to withdraw ETH it had staked and locked via staking providers like Lido Finance, as its own depositors rushed to withdraw their funds from Celsius.