According to a research report from Flipside Crypto shared with Cointelegraph, the rise in Ethereum validators underscores a broader trend of institutional interest in cryptocurrencies.
In September 2023, the number of validators stood at 824,300, marking a dramatic increase over a relatively short period. Carlos Mercado, a data scientist at Flipside Crypto, explained that the recent developments in the restaking and liquid staking sectors have captivated institutions looking for immediate liquidity and enhanced capital efficiency.
The Appeal of Liquid and Restaking
Restaking refers to the practice of using previously staked assets to stake again, while liquid staking allows investors to hold tokens that represent staked assets without losing the ability to access liquidity.
Mercado noted, “The rise of liquid staking and more recently restaking has enticed institutions interested in both immediate liquidity and enhanced capital efficiency.”
These innovations have created a new paradigm where investors can unlock the full potential of their assets while maintaining liquidity—a feature that is particularly appealing to institutional investors.
Liquid staking derivatives like Lido Staked ETH (stETH) and RocketPool’s rETH have become instrumental in this growth.
These tokens allow validators and stakers to secure and validate other networks while simultaneously providing them with liquidity.
Moreover, these assets can also be utilized in other decentralized finance (DeFi) protocols to earn additional yield, presenting even more opportunities for investors.
The ability to restake liquid tokens has transformed the way institutions approach staking. Previously, the lack of liquidity during the staking process deterred many institutional players, but the new restaking protocols have alleviated this concern, allowing for greater participation and investment in the Ethereum ecosystem.
Institutional Interest: A Growing Trend
The rise in Ethereum validators is not an isolated incident but rather part of a larger trend of institutional interest in cryptocurrencies.
With the increasing legitimacy of digital assets, more institutional investors are exploring ways to participate in this burgeoning market.
The combination of innovations like restaking and liquid staking, along with the backing of well-established financial institutions, has created a conducive environment for the expansion of validator participation.
One key factor contributing to the institutional interest is the Ethereum network’s transition to Proof of Stake (PoS) during the Merge in 2022.
This transition made staking more accessible and attractive for investors. In addition, the Ethereum network’s upcoming upgrades and enhancements have further solidified its position as a leading blockchain for institutional investments.
The Impact of the Shanghai Upgrade
The recent growth in staked Ether (ETH) can also be attributed to the Shanghai upgrade, which occurred in April 2023. This upgrade allowed network participants to unstake their Ether for the first time since the transition to PoS.
The ability to unstake assets has played a crucial role in enhancing confidence among investors, who now feel they have more control over their investments.
According to the report, the total amount of staked Ether increased by over 27% in the past year, surpassing 34.7 million staked ETH for the first time in September 2024.
The approval of the first Ethereum futures exchange-traded funds (ETFs) has also created key growth periods for staked Ether, further enticing institutional investors.
Broader Staking Activities Across Blockchains
The growth of Ethereum validators is part of a broader increase in staking activities across various blockchain networks, including Polygon’s PoS network. In the past year, Polygon wallets involved in staking saw an increase of over 36.4%.
However, the number of Polygon-based validators has remained steady since June, partly due to the blockchain’s validator cap.
This indicates that participants are not discouraged by the potential for reduced staking returns, reflecting a robust interest in staking as a viable investment strategy.
The significant increase in Ethereum validators highlights the growing institutional interest in cryptocurrencies and the innovative solutions that have emerged to facilitate this engagement.
With the adoption of restaking and liquid staking, institutions can navigate the complexities of staking while maintaining liquidity and capital efficiency.
As the cryptocurrency landscape continues to evolve, it is likely that Ethereum will remain at the forefront of institutional adoption, paving the way for further innovations and opportunities in the blockchain space.
As more institutions recognize the potential of cryptocurrencies, the future of Ethereum appears promising, with a vibrant ecosystem that supports validators, stakers, and investors alike. The upward trajectory of Ethereum validators serves as a testament to the network’s resilience and adaptability in the face of changing market dynamics.