Bankless: Ethereum upgrade for one week - withdrawal, verification node, LSD

Disclaimer: This article aims to convey more market information and does not constitute any investment advice. The article only represents the author's viewpoint and does not represent the official stance of MarsBit.Editor: Remember to follow meSource: MarsBitIt has been a week since the end of Ethereum Shanghai upgrade.After this upgrade is completed, the pledgor can withdraw funds, including 32 ETHs pledged and accumulated rewards.In the months before the upgrade, ETH doomsayers depicted terrifying scenarios, predicting that months of full withdrawals and suppressed selling pressure would be released from the beacon chain.The reality is clearly more positive: the scale and composition of queue exits are still encouraging, the number of net validators is increasing, and the development trend of the liquid collateralized derivative (LSD) market is very strong.Exit queueAttempting to remove all 32 pledged ETH users from the beacon chain is called complete exit. Exit must first queue up.Unlike partial withdrawals of cumulative pledge rewards, this type of withdrawal is not automatic and the process is more time-consuming. Under the current network restrictions, queuing to exit can only process a maximum of 1800 full withdrawal requests per day.Exit queue25.2%Kraken(23%)CEXCoinbaseLSD18.3%

Disclaimer: This article aims to convey more market information and does not constitute any investment advice. The article only represents the author's viewpoint and does not represent the official stance of MarsBit.

Editor: Remember to follow me

Source: MarsBit

It has been a week since the end of Ethereum Shanghai upgrade.

After this upgrade is completed, the pledgor can withdraw funds, including 32 ETHs pledged and accumulated rewards.

In the months before the upgrade, ETH doomsayers depicted terrifying scenarios, predicting that months of full withdrawals and suppressed selling pressure would be released from the beacon chain.

The reality is clearly more positive: the scale and composition of queue exits are still encouraging, the number of net validators is increasing, and the development trend of the liquid collateralized derivative (LSD) market is very strong.

Exit queue

Attempting to remove all 32 pledged ETH users from the beacon chain is called complete exit. Exit must first queue up.

Unlike partial withdrawals of cumulative pledge rewards, this type of withdrawal is not automatic and the process is more time-consuming. Under the current network restrictions, queuing to exit can only process a maximum of 1800 full withdrawal requests per day.

币安最近成为美国监管机构调查和行动的目标，其Exit queue的份额已增加到25.2%，从Kraken(23%)手中夺走了第一名的位置。同为CEX的Coinbase——为数不多的支持兑换的LSD提供商之一——以18.3%的份额位居前三。

Centralized pledge providers have always been the "losers" in terms of withdrawals, with many factors leading to their failure. The US Securities and Exchange Commission is targeting the pledge market, especially those with centralized characteristics of pledge service providers. Some stakeholders may wish to quickly withdraw funds from these entities before the news is reported.

From a purely financial perspective, it is attractive to withdraw funds from expensive intermediaries. For example, Coinbase currently provides 3.95% ETH collateral. Simply switch to Frax to obtain a return of 5.41%, which is a simple way to obtain more collateral returns.

The selected stakeholders may have ulterior motives beyond their economic interests. Providing pledge to centralized intermediaries will bring about the problem of net neutrality, especially in an era of block production in which OFAC is mandatory. Choosing a decentralized solution can help alleviate the vector of network centralization.

随着质押者的存储一直持续到 2020 年 12 月，“孤援无主”的Krake质押者需要替代方案，质押者寻求高回报的收益解决方案，以及去中心化的质押转移，Exit queue仍然处于饱和状态。

虽然Exit queue的规模自上周以来略微增加了约100个验证人，目前是23100，但网络同期已处理了17.5万个完整的验证人退出。 我们预计，随着时间的推移，这种情况会减少，为所有类别的利益相关者提供即时的流动性。

Currently, all full withdrawals are estimated to be processed within 17 days, including a mandatory minimum 27 hour delay period.

Verifier

LSD previously provided collateral liquidity. However, prominent regulatory and tax issues, as well as limited liquidity of the subject matter, have prevented many ETH investors from investing through this channel.

At present, the pledge on the Ethereum beacon chain is bidirectional. It is undeniable that for many categories of investors, the Shanghai upgrade is a huge risk reduction event. Since the release of Confidence Standard Chain, the solution of "pledge as a service" and "separate pledge" has become a feasible choice for ETH holders who want to maintain pledge liquidity.

Although the lock-in ETH (including pledge rewards) on BeaconChain only fell for 5 days after Shapella, it rose against the trend for 2 days on April 17 and then fell on April 19.

由于Exit queue的机制设置，早期存款人获得优先退出权，可以将提款预先加载到给定提款轮启动，如下所示为间歇性提款峰值。截至今天上午，净流量再次转为正值，这一趋势预计将持续到本轮提款结束后4天左右，届时将观察到类似的退出活动高峰。

Although some divestment intensified the outflow of funds in the early stages after the completion of the upgrade in Shanghai, we have largely overcome this obstacle. The vast majority of withdrawals nowadays are full or principal withdrawals. In the early stages of the withdrawal, deposits continued to flow in and net flow turned positive, which proves that the risk of investment has decreased now and the number of future withdrawals is also decreasing.

So far, the main beneficiaries of these liquidity have been pledge pools. Since April 10th, the net cumulative share of the pledge pool in ETH pledges has increased by 30 basis points to 15.8%, while the shares of LSD and CEX pledge providers have decreased by 10 basis points and 20 basis points respectively during the same period.

Solo Stacking has not yet benefited from the decline of LSD and CEX dominance. However, we expect that with the emergence of demand for withdrawals and the increasing number of pledge providers supporting withdrawals, it is evident from the data that there has been an increase in individual pledge participants.

Strong LSD market

Many mobile mortgage providers have not yet activated withdrawals.

Coinbase is an issuer of pledged derivative cbETH and a provider of various retail and institutional pledge solutions, but it is an exception as it provides withdrawal functionality within 24 hours after Shapella is deployed to the main network.

After the withdrawal, the redemption volume of cbETH immediately surged, reaching 35600 on April 13th.

Although exported as a pledge, cbETH's net coinage activity (surprisingly) remained active for several days, similar to the net inflow pattern observed in the broader Ethereum pledge. The increase in supply of cbETH shows the confidence of ETH holders in investment, which contradicts the argument of being eager to exit.

RocketPool provides some ETH liquidity for stakeholders, satisfying the request to extract rETH from cumulative consensus layer rewards. However, for the vast majority of LSD protocols, pledged derivatives cannot redeem ETHs that support it. For some of these agreements, we see that their anchor exchange rates are affected, rather than their derivative circulation supply.

Lido's stETH was plagued by significant selling pressure and fell to a level of 0.26% lower than the underlying asset on April 12th. Although it did not fall below the linked price, RocketPool's rETH trading premium was 0.02%, which is the lowest level since October 2022.

However, due to these local lows, stETH has been linked to it by less than 4 basis points, while rETH's current trading premium is 0.25 basis points. As redeemable commitments become a reality, in theory, these pegs should begin to stabilize as holders will be able to freely exchange between pledged ETH derivatives and underlying assets.

The DeFi lending market once again shows signs of a recovery in LSD supply and demand.

On April 4th, the utilization rate of the Compound Ethereum lending market, which is mortgaged by stETH and cbETH, hovered around 40%, and collateral supply and lending activity also sharply decreased at the beginning of the month. Today, the utilization rate is 60%, the collateral provided has increased to 29400ETH, and the borrowed ETH has increased to 24100ETH, representing an increase of 17.1% and 38.7% from the low points in early April, respectively.

The lending activity of the decentralized encrypted lending platform Aave has also shown signs of recovery, with stETH's loan yield increasing from 0.0% to 0.02%. Since the introduction of withdrawals, the borrowing cost has doubled from 0.3% to 0.6%.

Looking back on the past week

Although it may still be too early to celebrate the recovery of the bull market, our concerns about collateral have not yet come true.

Although a week of data is worth looking at, we have not yet observed the Ethereum sell-off caused by the crazy exit. In fact, the situation is exactly the opposite. The price of Ethereum has skyrocketed to over $2100 (with a slight decline thereafter), and the trend of net investment outflows is reversing.

The main driving factors for capital outflows are regulatory agencies forcing entities to divest, as well as investors fleeing the expensive centralized pledge service providers. This trend marks an encouraging sign - the decentralization of cybersecurity. We anticipate that this trend will continue as other intermediary platforms add withdrawal functions for clients and protocol users.

On chain data indicates that LSD providers are still beneficiaries of net inflow of collateral, and the clear demand for derivatives is evident in the regression of stETH (or rETH premium) and the increase in loan pool utilization.

Although people are just beginning to feel the impact of Shapella, it can be said that this Ethereum hard fork has achieved great success, providing liquidity for depositors and further promoting the decentralization process of network security.