TL; DR
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Ethereum’s once busy queue for new validators has almost completely disappeared, reaching 0 at one point yesterday.
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In June, validators earned a juicy 5.2% return on their staked ETH. Today it is only 3.5%.
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Moreover, government bond yields are currently high: short-term US government bonds yield a yield of 5.35%.
Full story
Q: How do you convince regular people to ensure transactions on the Ethereum network are secure?
A: You pay them!
It has worked like a charm for the past eight years – so much so that it has created a queue of people waiting to become transaction validators.
(There is a limit of 3,600 validators allowed to participate in the validation process per day).
But all good things come to an end. Ethereum’s once busy queue for new validators has almost completely disappeared, reaching 0 at one point yesterday.
(Zero – zip – zero!)
The number of validators has since risen back to 996, but it’s still a far cry from the peak on June 10, when more than 96,500 validators waited patiently in a 45-day queue.
What is happening here?
First, the rewards aren’t what they used to be.
In June, validators earned a juicy 5.2% return on their staked ETH. Today it is only 3.5%.
(That doesn’t seem like much, but for validators it’s like going from sipping champagne in the penthouse to sharing a box of wine in the cellar).
Second, government bond yields are currently high, with short-term US government bonds yielding 5.35%.
This means that staking ETH (a high-risk asset) is now fewer more lucrative than the world’s safest and most boring way to earn returns: buying government bonds.
Okay… should we be concerned?
Um, not really.
Volatility in price, demand and general interest is all normal in the crypto world.
Revenues will fluctuate. Validators will come and go. The sun will rise tomorrow.