Ethereum’s proof-of-stake system is currently facing a significant challenge, with approximately 2.5 million ETH—valued at around $11.25 billion—awaiting exit from the validator set. As of mid-September, this backlog has resulted in exit wait times extending beyond 46 days—the longest duration witnessed since the inception of Ethereum’s staking mechanism. The spike in exits began on September 9, when Kiln, a major infrastructure provider, opted to withdraw all its validators as a precautionary measure in the wake of recent security threats, including significant breaches. This decision alone pushed around 1.6 million ETH into the queue.
The situation is further complicated not only by the security concerns but also by market dynamics; following an explosive 160% rally in ETH prices since April, many stakers are capitalizing on the opportunity to take profits or adjust their institutional portfolios. Simultaneously, the number of validators joining the staking network is on the rise. Ethereum’s “churn limit,” a protocol measure designed to stabilize the network by capping the rate at which validators can exit or enter, is limiting the flow to 256 ETH per epoch (approximately 6.4 minutes). This restriction contributes to the growing exit queue, which means that stakers may face up to 44 days just to begin the cooldown process before exiting.
In a related development, the Ethereum ecosystem is navigating a paradox: despite a surge in the price of ether, decentralized finance (DeFi) activities on Ethereum’s layer-1 (L1) are reportedly dwindling when contrasted with late 2021 peaks. Fees collected on Ethereum’s mainnet fell to $44 million in August, marking a 44% decrease from the previous month. Meanwhile, layer-2 (L2) networks like Arbitrum and Base are flourishing, with total value locked (TVL) climbing to $20 billion and $15 billion, respectively. This divergence raises questions about whether L2s are drawing liquidity away from Ethereum’s DeFi activities or if the ecosystem is simply evolving into a multi-layer financial architecture.
According to AJ Warner, the chief strategy officer of Offchain Labs, while it may appear that L2s are cannibalizing activity from L1, the metrics tell a more complex story. Warner contends that Ethereum is becoming a “global settlement layer,” facilitating high-value transactions and institutional engagement, separate from typical DeFi metrics. Developments like BlackRock’s BUIDL product and Franklin Templeton’s tokenized funds underscore Ethereum’s foundational role in the broader crypto finance ecosystem.
The Ethereum Foundation is also making strides to keep pace with technological advancements by establishing a new artificial intelligence (AI) team, dedicated to transforming Ethereum into a coordination and settlement layer for what they term a “machine economy.” The newly formed group aims to focus on enabling AI agents to transact autonomously without requiring intermediaries and developing a decentralized AI infrastructure that reduces reliance on dominant tech firms.
In a novel application of blockchain technology, American Express is rolling out Ethereum-based “travel stamps,” which are essentially NFTs minted and stored on Coinbase’s Base network. These stamps serve as commemorative tokens that can be collected whenever a traveler uses their card, adding an interactive dimension to the travel experience. The tokens are not intended for resale or as loyalty points but are designed to enhance the richness of the travel experience, according to American Express officials.
In regulatory news, the chief policy officer at Coinbase has argued that stablecoins do not pose a threat to the traditional financial system, countering claims from the banking sector that they could lead to significant deposit outflows. The official emphasized that evidence does not support the notion of stablecoins endangering community banks, suggesting that banks may be more concerned with preserving their payments revenue rather than addressing genuine risks.
SEC Chair Paul Atkins indicated that the regulatory framework for cryptocurrency is set for modernization, pledging to expand “Project Crypto” to introduce clearer rules for tokens and trading platforms. Atkins’s remarks at an OECD event suggest a potential shift from an enforcement-driven approach to one focused on providing regulatory clarity, which could pave the way for innovation and streamlined capital raising within the blockchain space.
Upcoming events in the crypto calendar include Korea Blockchain Week in Seoul from September 22-28 and Token2049 in Singapore on October 1-2. Other noteworthy events are scheduled throughout the year, focusing on various aspects of blockchain technology and its applications.
