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Explore FAQs about the Shapella Fork: Enabling Withdrawals for Ethereum Stakers - Blockdaemon Blog
The Shapella fork is coming to Ethereum Mainnet in March 2023!
We want to provide anybody staking $ETH all the details of what the highly anticipated withdrawal feature will look like.
Want to hear more about how Blockdaemon can help you with your Blockchain journey? Contact us today to chat more about our blockchain solutions, or read on to get a closer look at what’s new.
There are no actions required by Blockdaemon customers before the Shapella hard fork on Ethereum Mainnet to enable the receipt of their accumulated staking rewards!
The following FAQs are for informational purposes only and do not require any extra steps from the customer.
Both! The naming of this significant change (specified in EIP-4895) is a bit misleading in terms of what activity is meant and if action is required from the user:
The ~1 million $ETH is correct, as is the fact that a reward sweep through the full set of ~500k validators takes about 4-5 days.
But the fact a lot of people overlook and that makes it hard to pin down exactly is the following: of the current ~500k validators, about ~300k are still having the old withdrawal credentials (0x00 BLS), and these get skipped in the sweep. Therefore the availability of additional $ETH liquidity (not meaning all is sold, quite a lot could be restaked!) depends on the speed that validators update their credentials to 0x01 normal addresses.
The maximum technical throughput of this credential update operation is similar to the withdrawal sweep, so it would take about 3 days for ~300k validators, but likely much longer as the owner’s of the validators will not all be ready/aware/able to update the credentials right around the Shapella fork.
It is important to note that nobody really knows.
The overall sentiment seems to be that over the course of a few months, there is actually going to be an inflow of Eth, rising the percentage of stake in the network above the current ~14%. But in the short term after the fork, there is a lot of reshuffling to be expected:
All in all, particularly the last point makes it somewhat likely that an exit queue might be forming for some time after the Shapella fork. If 20% of all validators would want to exit (and have their credentials updated in time!) the exit queue could amass up to 60 days.
The good news to keep in mind: all validators will continue to receive rewards during their time in the exit queue.
It is also important to know that while the capacity of the activation and exit queue is the same, these are separate queues. So depending on the amount to be (re)staked, there could also be an activation queue forming, but exits and activations will not slow each other down.
We teamed up with our partners from Metrika to allow you to monitor the length of both activation and exit queues for Goerli testnet as well as Ethereum Mainnet on this microsite. Please help to spread the word of this community resource!
Due to some variable components, there is no exact time interval to receive one’s accumulated protocol rewards on Ethereum. But it is likely safe to say that these rewards should be arriving within a few days after the Shapella fork at the withdrawal address on the execution layer.
(After the Merge, the additional tx fee & MEV rewards from the Execution Layer were already liquid on the feeRecipient, which might be configured to the same or a different address.)
With the accumulated protocol rewards becoming liquid on Ethereum, stakers are obviously free to use them any way they like. To most, it will likely make sense to double down on their staking conviction by restaking their rewards. This could increase their rewards and grow them over time via the compounding effect.
Unfortunately, the Ethereum protocol does not offer auto-compounding natively, as some other PoS protocols do. And with the minimum requirement of 32 $ETH per validator, there is even another hurdle to overcome. One solution can be liquid staking, as it practically eliminates the minimum amount to stake. And even better, most liquid staking protocols like Lido, RocketPool or StakeWise have auto-compounding baked into their system. Blockdaemon also offers liquid staking for our institutional customers with world-class partners, such as B2C2, Bit Digital, and Amdax. And we are also developing a semi-automatic compounding feature for our classic staking offering via our Ethereum Staking Integration API.
Due to some variable components, there is no exact unbonding/exit time on Ethereum. But it is likely safe to say that generally a voluntary exit of Ethereum validators should be finished within about a week.
There are three main components making up the total duration to unbond/exit one’s $ETH stake:
Due to these various variable components, there is no exact unbonding time on Ethereum. It is likely safe to say that generally a voluntary exit of Eth validators should be finished within a week.
All withdrawals are not transactions, so there will be no gas costs associated with withdrawals and on the executions layer the balance of the withdrawal address changes without an explicit sender.
So in order to track both regular protocols rewards and potentially also any exited collateral arrive on the WithdrawalAddress, transaction-based tooling will not work.
Withdrawals will be identifiable as a new type of object in an Ethereum block and will possess its own dedicated data field in the block header with the following information:
The major block explorers like Etherscan.com and Beaconcha.in will show these values per block in a separate list.
Blockdaemon customers will be able to track the status of their exiting validators via our Ethereum staking dashboard inside the Blockdaemon App soon after the fork (however at different granularity that does not follow all sub-steps of the exit process).
In order to receive any protocol rewards or the collateral, the withdrawal address needs to be set in the 0x01 normal execution layer address format. If it was specified as BLS 0x00 withdrawal credential upon setup of the validator initially, it first needs to be updated, which can only happen at a maximum capacity of 16 addresses per block after the fork is activated.
Blockdaemon customers do not need to worry about this step, as they were set up in the new way and are good to go!
Interestingly, liquid staking solutions might actually gain market share post-Shapella.
This can be explained by the fact that the main benefit lies in the receipt token issued by liquid staking protocols. These can be used to either leverage the staking position or utilized in other DeFi use cases, e.g. as collateral for lending. The instant staking/unstaking capability is also highly attractive, as it eliminates and waiting times for users and further improves capital efficiencies.
So abolishing the lock-in via the enablement of withdrawals does not seem to be taking much away in terms of the value proposition of liquid staking. And since liquid staking solutions were not available in the early days of Ethereum staking, some of the currently locked stake might actually be withdrawn to be restaked in either retail protocols like Lido, RocketPool or StakeWise, or the liquid staking product Portara for institutions. Blockdaemon has already rolled out Ethereum institutional liquid staking with world-class partners, such as B2C2, Bit Digital, and Amdax.
Speak to your Technical Account Manager (TAM) (formerly known as Relationship Managers) for more details or any other question.
If you are not a Blockdaemon customer yet, please contact us: https://blockdaemon.com/get-in-touch/
Partial withdrawals, i.e. pushing the accumulated protocol rewards to the configured withdrawal address, are happening automatically by the protocol, see details above.
For full withdrawals, i.e. completely exiting a validator to reclaim the 32 Eth collateral, there are various options:
We support the full validator lifecycle on Ethereum with our staking tooling, also on Goerli testnet:
We can also provide you with the necessary 32 $GoerliEth testnet tokens, just get in touch with your technical account manager (TAM).
Some customers require a way to exit their validators at any time without any interaction with Blockdaemon for compliance reasons. We now provide a dedicated API endpoint to enable these business continuity use cases via pre-signed exit messages.
Please note: We advise caution, as you need to keep these messages very safe!
They cannot be used to steal your funds or get you slashed, but particularly in times of long exit and activation queues the process of restaking is cumbersome and the loss of potential staking rewards could be used to blackmail you. Once you have generated the message, we cannot be held liable if the validator exits unintentionally. Plus the messages need to be rotated (newly created and replaced) after every hard fork in order to stay valid.
An Ethereum validator cannot be re-used once the exit process has been initiated.
And potentially long exit and activation queues make the unstake/stake processes cumbersome and lead to some loss of potential rewards. In the B2B2C business model, you could try to match the inflows with outflows via a defined buffer over some time. This could potentially cause regulatory concerns and might lead to lower APRs due to the unused buffer capital.
Blockdaemon offers two solutions in this regard:
We teamed up with our partners from Metrika to allow you to monitor the length of both activation and exit queues for Goerli testnet as well as Ethereum Mainnet on this microsite.
It also contains links to other great resources, like the metrics to monitor the Network Upgrade as well as the Withdrawals Overview dashboard.
Please help to spread the word of these community resources!
Contact us to learn how we can help you power your blockchain business.
