Ethereum staking bottleneck approaching? DAT, staking-type ETF, optimistic sentiment chain effect

The demand for staking on the Ethereum network has surged, and multiple factors may lead to longer staking wait times, and investors need to be prepared to queue up. (Synopsis: V God responds to Ethereum staking withdrawal congestion: delay is to protect blockchain security, user experience has room for improvement) (Background supplement: V God revealed that "disappointed with the development of AI Agent": should pay attention to decentralized open source and user feedback) ETH holders who want to stake tokens may be time to start queuing, as there could be a significant surge in staking demand in the coming weeks. As of the end of last week, there were 422,143 ETH in the validator access queue of the Ethereum network, with a total value of $1.94 billion at current prices. Although this number is down from 986,824 ETH in August, it is still an all-time high level for the network since the events of "The Merge" in September 2022 – it was in "The Merge" that Ethereum officially enabled the PoS consensus mechanism. (Verifier queue data chart) But don't be fooled by the "declining number of staking queues" in the chart above – this trend has reduced the staking wait time from 16 days to 8 days, but the number of cohorts will soon surge again. Why? On September 9, Kiln preemptively unstaked all of its ETH holdings due to a security incident involving Kiln, a $15 billion staking service provider that provides security support for multiple proof-of-stake networks. For reference, Kiln is currently the fifth largest ETH staking institution, with more than 1.6 million ETH under management. As the chart above shows, this directly led to a surge in Ethereum's "exit queue" (i.e., the number of ETH to be unstaked) from just over 500,000 to over 2.5 million. (Dune Analytics) However, after "exiting", it will eventually "return", and once Kiln determines that the network is secure, all ETH that it has previously unstaked will re-enter the staking queue. And this "regression" node may coincide with the explosion period of the other three sources of staking demand, when Ethereum's staking waiting time may be greatly extended. Other key sources of demand Digital Asset Treasury (DAT) If 2024 is the "year of ETFs," then 2025 is undoubtedly the "year of digital asset treasury (DAT) companies." Aside from Bitcoin, ETH is the most valuable asset locked in the digital asset treasury. According to the data aggregation platform "Strategic ETH Reserve", Bitmine Immersion, Ether Machine, Sharplink Gaming and other companies currently hold a total of 499,000 ETH, worth $22.97 billion (see chart below). These companies' ETH holdings have grown rapidly and are approaching the size of their ETH spot ETFs, which currently hold 675,000 ETH and are worth just over $31 billion. (Strategic ETH Reserve) ETH proponents argue that the core reason why this asset is more suitable for crypto asset reserve companies is that these companies can earn passive income by staking ETH. According to the Compound Ethereum Loaning Rate (CESR), a daily benchmark rate representing the average annualized staking yield of the Ethereum validator community, ETH currently has an annual staking yield of 2.91%, although this yield will adjust as ETH price fluctuations and the total amount of staking at a specific point in time. Chris Perkins from Coinfund said that this "yield" can be compared to the "London Interbank Offered Rate (LIBOR)" in the Ethereum space, which belongs to the "risk-free rate" in the ecosystem. It should be noted that if you use liquid staking instruments such as Lido or Rocket Pool, the effective yield will be less than 2.91% due to additional fees charged by the platform. (RHO protocol) Furthermore, unlike Bitcoin (which is still a inflationary asset despite being capped at 21 million BTC), Ethereum's current mechanism has been set to "become a deflationary asset when network usage is high enough." As digital asset treasury companies compete to increase their ETH holdings (led by Tom Lee's Bitmine Immersion, which holds $9.9 billion worth of ETH), they will quickly stake their increased ETH to start accumulating gains as quickly as possible. Given that most of the funds raised by these companies this summer, this "pledge after increase" move is likely to be one of the core reasons for the expansion of the previous Ethereum staking queue. Kam Benbrik, head of research at institutional staking service provider Chorus One, said: "A large portion of the new staking comes from digital asset repositories such as Sharplink, the second-largest digital asset treasury with approximately US$3.6 billion in ETH and having publicly announced that 'nearly 100% of its holdings are used for staking'. We expect the staking fleet to expand further, and one of the core enablers is Bitmine. On-chain data shows that Bitmine has not yet started staking its ETH holdings, and as the largest ETH digital asset treasury at present, once it starts staking, it will definitely have a significant impact on the size of Ethereum's staking fleet." (Editor's note: Leeor currently works at Chorus One, where he is head of U.S. marketing.) (Strategic ETH Reserve) As these digital asset treasury companies plan to raise further funds, similar growth in the size of Ethereum's staking fleets is highly likely in the future. However, it is not entirely clear what percentage of the funds raised by these companies have been used for staking. In response to a question from Unchained, Sharplink said that "nearly 100% of ETH has been used for staking", while Ether Machine said that "more than 90% of assets have been used for staking"; The current size of Bitmine's pledge is still unclear - the company's representative declined to provide specific data in an interview with Unchained, suggesting only to refer to the company's official website. Mara Schmeidt, CEO of institutional staking service provider Alluvial, also believes that a large number of ETH held by digital asset treasuries are still in an "idle unpledged" state. "There are several well-known digital asset treasury companies that have acquired ETH but have not yet used it for staking – these are all familiar names in the industry," she said. We expect the current idle ETH to reach billions of dollars." The second largest source of demand for staked ETFs is "staked Ethereum ETFs" – which are expected to receive SEC approval this fall to officially launch ETH staking operations. Although the SEC has postponed the approval decision for a number of staked ETF applications from September 10 to October, the final approval deadline is approaching. Bloomberg analyst J...