Dublin, Ireland – Cryptocurrency investors are experiencing delays in withdrawing their funds deposited on the Ethereum blockchain after its major software upgrade, known as “Shapella”. The upgrade was expected to unlock more than $30 billion worth of ether, the second-largest cryptocurrency, which investors had deposited on the Ethereum blockchain in exchange for interest. However, until Wednesday’s upgrade, investors were unable to withdraw their funds using the staking method on the Ethereum blockchain. As of Thursday, approximately $1.4 billion worth of ether was stuck in a withdrawal queue, according to blockchain data firm Nansen.
The delays highlight the challenges that Ethereum faces in processing transactions and its potential limitations as it strives to become a widely-used financial infrastructure. The Ethereum Foundation, which speaks for the network, has not yet commented on the matter. Nansen analyst Martin Lee explained that the delays were due to limits in the amount of transactions the blockchain can process. He stated that the blockchain can process approximately 1,800 validator withdrawals or 57,600 ether worth of exits per day, which is equivalent to approximately $115 million.
Lee also explained that the limits on validator withdrawals were put in place for security reasons. He stated that “in an extreme scenario, if there’s no limits, and a large majority of validators exit, the Ethereum network would be vulnerable to attacks and bad actors.” Ethereum has become popular for offshoots of the crypto market, such as decentralized finance or NFTs, but it has yet to be used in mainstream payments, finance, or commerce.
The major Binance exchange has informed users that they will be able to withdraw their ether from its staking product from April 19. However, it may take “15 days to several weeks” to process these transactions due to the processing limitations on the Ethereum network. Binance has stated that it will set a daily ETH redemption quota for each Binance user due to these limitations.
Lee from Nansen predicts that the backlog will likely take weeks to clear. Afterward, depending on the average daily “unstaking” amount, it would take just hours or a couple of days to process withdrawals. The delays faced by investors highlight the need for Ethereum to address its transaction processing capabilities to become a widely-used financial infrastructure.
