KANALCOIN NEWS – The Ethereum Improvement Proposal (EIP) aimed at slowing the growth rate of ETH staking, EIP-7514, has now been approved. Ethereum’s core developers included it in the upcoming Dencun upgrade scheduled for late 2023, giving the Ethereum community additional time to craft. improved validator reward scheme.
Previously, the churn limit was calculated by taking the total number of validators/65536, which currently equates to about 12/epoch. However, the main modification brought by EIP will set the Max Epoch Churn Limit, the upper limit of the validator activation queue.
The decision was taken after the Ethereum Core Developer Meeting. The Beiko team tried to shed light on completing another Ethereum #AllCoreDevs:
“We discussed devnet updates, additions to Dencun, and got the full picture of Reth. EIP-7514 will be part of the Dencun upgrade! Expect the EIP and associated CL spec PR to be updated to reflect all this in the coming days.” Team Beiko explains
The importance of this change and providing insight into the consensus among the Core Development team was underscored by the Beiko Team. Dankrad Feist, a researcher at the Ethereum Foundation, explained the importance of this agreement.
“My reason why I chose EIP-7514. It is currently unclear whether staking (especially liquid) will continue to grow indefinitely. If the withdrawal queue does not empty in the next few months, a lower churn limit will give the Ethereum community the time needed to research, debate, and implement solutions.”
Impact On Ethereum Price
A continuously increasing staking ratio will result in a reduction in available liquid ETH. Even if the ratio is close to 100%, it could cause a shortage of supply and increase the selling price. However, due to potential technical and security implications, ETH developers do not recommend this scenario.
This is the reason why EIP-7514 indirectly impacts the price of ETH by manipulating its supply side. Even though it has a direct impact, its effect on prices is not anticipated. Because any potential impact on prices will likely materialize over a long period of time.
According to GitHub, The motivation behind EIP-7514 is to reduce the negative externality of the extremely high total supply of ETH being staked before a proper solution is implemented.
If the deposit queue remains 100% full, the staked portion of the ETH supply will reach 50% in May 2024, 75% in September 2024, and 100% in December 2024.
EIP-7514 as a temporary measure. Provide time for communities to consider and develop comprehensive solutions to emerging challenges. Because small profits are not a barrier to betting further capital. Especially with MEV’s often large and uncertain returns.
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