The new strategy adopted by the bankrupt crypto lender Celsius Network in ETH staking has made headlines in the cryptosphere. Indeed, the choice of crypto lender significantly lengthens the wait time for new Ethereum validators waiting to get activated on the network.
Over a two-day period, Celsius transferred significant amounts of ETH into staking contracts after buying back nearly $813 million worth of ETH placed on LidoFinance. The company has placed $745 million worth of ETH in staking since early June, according to data provided by Arkham Intelligence.
Tom Wananalyst at 21Sharesa crypto investment product management company, noted that these operations have caused queue-level congestion for new validators on the Ethereum network.
“If Celsius decided to stake all of these 428,000 ETH, it would take 45 days and 4 hours for the queue to be processed.“, he said. Celsius is potentially responsible for adding an additional week.
The recent transactions follow the lender’s decision to review the allocation of its ETH holdings following Ethereum’s latest upgrade, Shanghai. The latter introduced a feature that allows withdrawal from staking contracts in April.
At that time, Celsius held approximately 460,000 ETH, worth $870 million, staking with Lido Finance. Around 160,000 tokens representing $300 million at current prices, were deployed in its own staking pool.
These transfer operations occur while the company is in the process of restructuring after filing for bankruptcy in July. This bankruptcy was followed by its takeover by Fahrenheitan investment group backed by Arrington Capital.
As reported, Celsius has locked nearly $75 million worth of ETH through the staking service figure in mid-May.
On-chain data shows that the transfer from Celsius to Figment was made through fourteen separate transactions made between May 10 and May 12, with a total of 40,928 ETH.
As of press time, the company has placed approximately $199 million worth of ETH through Figment. Separately, it has also deposited around $12 million in its staking pool, according to Arkham data.
Celsius wallets still had about $109 million worth of ETH after transfersestimated Arkham.
Long wait times for Ethereum validators
Celsius’ decision exacerbates delays for entities and/or individuals attempting to add new validators to the Ethereum network.
On proof-of-stake blockchains, validators are the primary entities in charge of network security. They oversee transactions in exchange for a reward by placing their tokens.
The demand for staking has increased significantly since the Shanghai upgrade which was activated on April 12.
Compared to withdrawals, deposits increased by nearly $5.5 billion. Newcomers now have to wait a month to become validators, according to data provided by the blockchain intelligence firm Nansen.
Celsius Network had initiated restructuring proceedings in the summer of 2022 as the prices of most major crypto-assets crashed.
According to some analysts, a key element of Celsius’s collapse was its inability to withdraw ETH stranded through staking providers like Lido Finance, as its own depositors rushed to withdraw their funds from the lending platform.
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