The once-prominent crypto lender, Celsius Network, now defunct, has made waves with its recent alterations to its Ethereum (ETH) staking approach, further prolonging the already lengthy process of activating new validators on the Ethereum blockchain.
In just two days, Celsius channeled ETH into staking contracts, having previously reclaimed roughly $813 million of staked ETH from Lido Finance. Since the start of June, the company has staked an amount nearing $745 million in ETH, as per data sourced from Arkham Intelligence.
Tom Wan, an analyst with crypto investment product management firm 21Shares, pointed out that these transfers have intensified the existing delay in launching new validators on Ethereum.
Should Celsius opt to stake the entirety of the 428k ETH, Wan estimates that “it would consume 45 days and 4 hours to process the entire activation queue.” In essence, this would mean an added delay of nearly 6 days and 15 hours.
The wait time to initiate new validators on the Ethereum network has extended to 44 days, and Celsius’s recent activities might be contributing nearly an extra week to this delay.
These recent shifts in staked holdings can be traced back to Ethereum’s Shanghai upgrade in April, which introduced the capability for withdrawals from staking contracts. During this period, Celsius had approximately 460,000 ETH, valued at around $870 million, staked with Lido Finance. In contrast, close to 160,000 tokens, which equate to roughly $300 million at present valuations, were allocated in Celsius’s own staking pool.
This flurry of transfers is set against the backdrop of the company’s organizational upheavals. In July, Celsius sought bankruptcy protection. Subsequently, it was acquired by Fahrenheit, an investment consortium under the aegis of Arrington Capital.
Celsius has reportedly directed approximately $75 million worth of ETH to the staking platform, Figment, during mid-May.
On-chain records pinpoint that a significant transfer from Celsius to Figment was executed through fourteen distinct transactions spanning May 10 to 12, cumulatively amassing 40,928 ETH.
Based on the most recent data, Celsius has staked an estimated $199 million of ETH using Figment. Additionally, around $12 million has been allocated to the Celsius’s own staking pool, as per figures provided by Arkham.
Post these transactions, Arkham’s estimates suggest that Celsius’s wallets continue to retain ETH valued at around $109 million.
Celsius Staking Extends Ethereum Queue
Celsius’s recent actions have exacerbated the strain on an already overwhelmed system, where many are queuing up to introduce new validators to the Ethereum network.
Validators, pivotal components in a proof-of-stake blockchain, play a crucial role in ensuring network security. By staking tokens, they supervise transactions and, in return, receive rewards for their contributions.
The allure of staking has surged considerably post the Shanghai upgrade. This upgrade, activated on April 12, incorporated a feature permitting the withdrawal of ETH staked within the Beacon Chain.
Deposits have outpaced withdrawals, experiencing an increase of approximately $5.5 billion. This influx has caused new participants to endure a month-long wait before they can establish their validators, as indicated by data from the blockchain analytics company, Nansen.
The downfall of Celsius Network occurred in the summer of 2022, coinciding with a significant downturn in the prices of most major cryptocurrencies.
A prevailing theory behind Celsius’ decline suggests its incapacity to access and withdraw the staked ETH, particularly those locked with staking services such as Lido Finance. This became especially problematic as Celsius’s own customers scrambled to pull out their investments from the platform.