Celsius Network’s $800 Million Ether staking change causes Ethereum validator queue strain – here’s the key info.

The now-defunct cryptocurrency lender, Celsius Network, has caused a commotion with changes to its ETH staking strategy, making the already long queue to activate new validators on the Ethereum network even longer.

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

Crypto investment product manager 21Shares analyst Tom Wan noted that these 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.

These recent transactions follow the lender’s move to reshuffle its staked ETH holdings since Ethereum’s Shanghai upgrade allowed 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.

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.

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

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.