DEDICATION
To the founders who set the ground, visionaries setting the bar, and builders who work through the night so others may play in the light; to the community of believers and challengers; to diligent validators who keep the chain safe and sound, and even malicious actors who test our security. To everyone who contributes to Ethereum and drives it to stay a flagship crypto technology for digital money, global payments, and applications.
TL;DR: ETHEREUM IS 9 IN A NUTSHELL
If I had done a sterling comprehensive review of Ethereum over the past nine years, I would have run out of Google Drive storage before I reached the Proof-of-Stake (PoS) era.
In order not to compete with Ben Edgington’s Upgrading Ethereum monograph and to allow you to get to every last page of this review (here you can meet the author herself, hiding behind the words of this report and NFT on X), I took a helicopter view of the events that made up Ethereum's history over the past nine years and summarized the staking ecosystem as of mid-2024.
And for even a quicker read, here’s a brief summary:
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Ethereum's resilience and longevity: Launched in 2015, Ethereum has navigated a turbulent crypto landscape, surviving for nine years despite market volatility, regulatory changes, and technical and governance challenges. This demonstrates its robust design and enduring appeal.
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The transformative power of staking: The introduction of staking in 2020 has been a game-changer for Ethereum. It has significantly enhanced network security, decreased the chain’s carbon footprint, and become a life-giving environment for a myriad of protocols, dApps, solutions, middlewares, initiatives, and projects.
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Continuous evolution and innovation: Ethereum is not static; it's constantly evolving. Regular upgrades, such as the recent Dencun upgrade, which focused on improving scalability and reducing transaction costs, and the emergence of novel concepts like restaking, ensure Ethereum remains at the forefront of blockchain technology.
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Leading position, but with challenges: Ethereum currently boasts the largest market capitalization and highest network security among Layer-1 (L1) blockchains. However, its future precedence is not guaranteed, with emerging competitors and potential scaling, security, and sustainability issues posing ongoing challenges.
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Promising future trajectory: Despite these challenges, Ethereum's future looks bright. Ongoing research and development, coupled with a thriving ecosystem of developers and dApps, indicate a strong potential for continued growth and innovation. The network's ability to securely facilitate global coordination and disrupt traditional structures remains a key strength.
If you are interested in Everstake's previous reports on Ethereum, please refer to our reports hub. Everstake publishes regular updates not only on the Ethereum staking ecosystem but also reports on Polygon, Cosmos, Aptos, Solana, and Tezos staking, which are available on our website, for your more comprehensive understanding of the Web3 ecosystem.
If referencing or using materials from this report, please attribute Everstake and provide a link to the original.
For any inquiries, contact our Segment Lead, Irina, on X.
ETHEREUM LANDMARKS SINCE 2015
Nine years.
Is it a lot? It depends on what you compare it with. Let's specify — is it a lot for a crypto?
According to the Alpha Quest 2024 Dead Coins Report, the crypto market has witnessed a considerable number of failed projects. The report says that almost 65% are classified as 'dead' or failed.
Source: 2024 Dead Coins Report: From (✏️) Creation to (💣) Catastrophe by Alpha Quest and Storible, 2024
Thus, being live and sound for nine years amidst all the ups and downs of the Web3 market, state regulations, and tech challenges is really decent. Grandpa Bitcoin celebrated 15 years old earlier this year, and its PoS sibling marks nine years across the sun, full of strength, energy, and ambitions to improve.
The next section explores the events and people that defined Ethereum’s shape and look these days.
2015: A FRONTIER BY NAME AND NATURE
Unlike Bitcoin designed primarily for non-regulated financial use, Ethereum's purpose was to serve as a platform for decentralized applications (dApps). The whitepaper was published in 2013, and the first public release of Ethereum, known as Frontier, occurred on July 30, 2015, following the extensive testing. The genesis block landed at 3:26:13 AM GMT. This marked the official birth of Ethereum, although it was just a skeleton of the Ethereum project, awaiting to be covered with its muscles and skin and filled with blood.
Only a few months after Ethereum came to life, DEVCON 1, a conference for builders of all kinds, was held in London in November of that year. This year it will celebrate its 7th iteration in Thailand. Don't miss a chance to get your ticket!
2016: THE DAO ATTACK AND THE FIRST HARD FORK
An unknown attacked The DAO (conceived and programmed by the team behind German startup Slock) and drained 3.6m Ether into a 'child DAO' with the same structure as the initial one. Several enthusiasts attempted to split The DAO to prevent more ETH from being stolen but couldn't get necessary votes in a short time.
As soon as The DAO contained roughly 15% of all ether, its failure may have had a negative impact on Ethereum, as a whole, and its token. A number of solutions were suggested, including from Vitalik Buterin, but only one came to action. It reached over 85% of the votes, but some refused to fork because this incident wasn't a defect in the protocol and went on to form Ethereum Classic.
Later that year, several hard forks, the Tangerine Whistle and the Spurious Dragon, were implemented to respond to the DoS attacks on the network.
2017-2019: CONTINUED DEVELOPMENT AND EEA CREATION
The beginning of 2017 was marked by the formation of Enterprise Ethereum Alliance (EEA), a collaboration between blockchain startups, research groups, and Fortune 500 companies aimed at promoting and facilitating the use of Ethereum in the enterprise sector.
It was at the same time that many of us found out how to breed kittens with CryptoKitties. A viral app caused major congestion in the Ethereum network, but the collaboration between the founding team, Ethereum Foundation, MetaMask, and Infura brought a solution to cope with this crisis pretty quickly.
Ethereum continued to improve its DoS attack resilience, gas optimization, address interaction, and new contract functions, as well as L2 scaling and reducing ETH from block mining from 5 to 3 ETH. This was achieved through a series of forks named after the metropolis—Byzantium, Constantinople, and Istanbul—as a part of an eponymous roadmap stage.
2020: PROOF-OF-STAKE AND LIQUID STAKING
The deployment of the first staking deposit contract in October introduced staking to the Ethereum ecosystem, paving the way for the launch of the Beacon Chain later that year.
The genesis of the Beacon Chain on the first day of winter was a pivotal moment for Ethereum, marking a significant step towards unlocking its full potential.
The Beacon Chain introduced PoS to Ethereum, being a chain of 'empty' blocks created to ensure the staking consensus logic was safe and sound before enabling it on the Ethereum mainnet. Therefore, it ran alongside the proof-of-work (PoW) Ethereum.
The same year we saw the introduction of a new promising concept—liquid staking, one that allows to secure the PoS network while solving the shortcomings of token lock-up illiquidity and the 32 ETH minimum staking requirement.
Lido, launched three weeks after the Beacon Chain, became the first liquid staking on Ethereum and is leading the way, setting a high bar of seamless user experience and protocol security. Currently, the team is focused on stake decentralization and operator diversification, adding new ones from underrepresented locations and tech set-up, implementing Simple DVT Module, and working towards Community Staking Module coming this fall.
Stader is another frontrunner of liquid staking enhancing both the security and accessibility of staking. Their solution simplifies participation in the staking for delegators and validators alike.
2021: BURN
Historically, Ethereum priced transaction fees using a simple auction mechanism. This led to a mismatch between the volatility of fee levels and the social cost of transactions, needless delays for users, and inefficiencies of first-price auctions (find a detailed explanation of these drawbacks in EIP-1559).
Thus, the way transaction fees on the Ethereum network were calculated changed with the London upgrade of August 2021. EIP-1559 introduced a new pricing that includes a fixed-per-block network fee that is burned and dynamically expands/contracts based on how congested the network is. As a result, the fee market became more complex, leading to more predictable gas fees and greater efficiency.
2022: MERGE
An eponymous upgrade refers to the original Ethereum PoW mainnet merging with a separate proof-of-stake blockchain called the Beacon Chain, from that moment existing as one chain.
This not only changed its consensus mechanism to staking and made the network more secure, scalable, and energy-efficient but also reduced Ethereum's energy consumption by ~99.95%.
2023: WITHDRAWALS AND DVT
In April 2023, the most anticipated and highly speculated Shapella upgrade enabled ETH withdrawal, allowing it for the first time since the staking became available in December 2020. Despite predictions of disastrous unstakes and a massive deprecation of ETH, the reality turned out to be completely different.
During the first month after withdrawals were enabled, the amount of staked Ether increased by around 3m ETH (+15.5%), creating several months of queue for activation that cleared out only in October. Our previous report takes a comprehensive look into this and other Ethereum stats in 2023.
This staking fever speeded up new staking mechanics. 2023 became the year of the rise of Distributed Validator Technology (DVT), which aims to ensure the highest security for the validator and increase the resilience of the Ethereum network.
SSV.Network was one of the earliest initiatives to adopt DVT. With 34k validators and 1.1m ETH staked at the time of the writing, it continues its mission to foster distributed LSPs and LRTs.
Another notable DVT solution is Obol, a protocol that fosters trust-minimized staking through multi-operator validation. Obol enables decentralized Lido through Simple DVT program and empowers decentralizing restaking with ether.fi.
2024: BLOBS AND RESTAKING
The first half of 2024 was highlighted by another major upgrade that defines the network vibes these days. Focused on enhancing the network's scalability and making transactions cheaper, Dencun made Ethereum more cost-friendly for users and rollups. See interim results in our article for Staking Rewards Journal.
Another year's spotlight focus is restaking, a new security primitive introduced by EigenLayer. It created a whole new brave ecosystem, boosted by the restake delegation introduction in April. AltLayer, Automata, Brevis, EigenDA, eoracle, Hyperlane, Lagrange, Omni, OpenLayer, Witness Chain, Cyber, DODOchain, GM Network, and Xterio (the latter four powered by AltLayer) were the first AVS, Actively Validated Services, launched on the mainnet.
Liquid restaking protocols became a rockstar across the community, allowing to stake ETH and support validation on various networks, integrated with a restaking protocol. Notable projects include ether.fi, Puffer, Renzo, and Swell.
At the beginning of the summer, we met Symbiotic, whose restaking design goes much further. This permissionless shared security platform makes the concept of decentralization quantifiable, providing immutable rails for projects and users to enter into alignment agreements with no intermediaries.
THE RISE OF ETH STAKING
Ethereum has always meant to be a Proof-of-Stake protocol, and it was only a question of time when this happens. When this transition occurred, it altered not only the consensus mechanism, but transformed the entire ecosystem's dynamics.
WHAT IS ETHEREUM STAKING?
The classic definition of 'ETH staking' according to ethereum.org:
Source: ethereum.org/en/staking
Staking allows you to receive ETH for helping the network reach consensus, properly batching transactions into new blocks and checking the work of other validators. It is a prerequisite for ensuring the network’s proper performance.
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Better security: The more ETH is staked, the more resilient the network is against possible attacks. A malicious actor would be able to hijack the network only if they exercised control over the majority of validators, and the more ETH is staked, the more difficult it is to do that.
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Higher sustainability: Stakers don't need to do energy-intensive PoW computations to participate in securing the network, meaning validators can run using very little energy.
Any user with any amount of ETH can help secure the network and earn additional ETH tokens as a reward.
As a long-term staking provider, we are true staking champions, knowing and diligently following all aspects of the Ethereum PoS consensus mechanism.
3½ YEARS OF ETHEREUM STAKING
Since December 1, 2020, 9.52 million blocks have been produced (and 92.45k missed!), and 33.58m ETH staked via 1.05m validators. Obviously, the growth was not linear—for detailed numbers and calculations, see Appendix 1.
The chart below shows the tendency of repetitive staking activation cycles. The biggest spikes of staked Ether are usually around the upgrades, each of which brought some highly anticipated feature: either burn, staking, withdrawals, or Proto-Danksharding (also known as blobs), showcasing strong community confidence and support towards new Ethereum.
This confidence is reflected in another chart, which shows how the staking rate is independent of APR or price fluctuations. In our 2023 Ethereum report, we explained why APR decreases over time: in a nutshell, this happens because the randomizing mechanism has to choose between a bigger number of validators to ensure that the same validator is not selected too often or too seldom. The more validators join the network, the lower the average APR is.
Since its introduction in December 2020, staking has generated 3.05m of additional ETH: 2.14m on the consensus layer, 511.97k of MEV, and 350.19k of priority fees.
But not only stakers gained—approx 20k of total consensus Ether penalties were accumulated, and 4.47m ETH burned as part of network economics.
Also, almost 450 ETH were cut due to slashing.
MISSION 'NEW HORIZONS'
New Horizons is an interplanetary spaceflight launched as a part of NASA's New Frontiers program. As Ethereum also kicked off with Frontiers, what’s its 'New Horizons'?
According to recent Galaxy research, Ethereum is the world's most sprawling blockchain, supporting over 4k dApps and attracting the highest number of developers, over 7k, among any public blockchain platform. Being superior to Bitcoin's L2 apps in terms of functionality and user experience, Ethereum remains the preferred platform for developers due to its mature ecosystem and broader acceptance.
Despite its almost 10-year on-chain history, Ethereum is still evolving. As the most popular blockchain and a powerful platform for global coordination, it continues to disrupt traditional societal structures. In turn, the wider Web3 ecosystem and community constantly challenge it to improve, scale, and become a more accessible and resilient platform.
Currently, Ethereum researchers and developers are actively working on solutions to cope with future challenges, preparing the network for generations to come. An ambitious set of 19 improvements are planned for the upcoming Pectra upgrade, expected to land on the mainnet in the first quarter of the next year.
Among the first steps towards account abstraction and upgrade to the Ethereum Virtual Machine (EVM) called EOF, a notable change to the staking mechanism will take place, as the maximum staking balance per one validator will increase from 32 to 2 048 ETH. This change has multiple implications:
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Unlocking future upgrades: It paves the way for future consensus layer upgrades outlined in the roadmap.
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Performance enhancements: It improves the performance of the current consensus mechanism and peer-to-peer (P2P) layer.
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Operational efficiency: It enhances operational efficiency for both small and large-scale validators.
However, it also comes with a reasonable increase in risks, including problems this EIP presents for the UX, especially degrading it for home stakers, added operational complexity, increased slashing penalties, and others.
Although stake cap or targeting was not included in the next upgrade, it brought up many discussions, arguments, and X posts across the broader ecosystem, including professional node operators, community, and solo stakers. Those who run the nodes, while passionate about the Web3 ethos, are ultimately motivated by fair compensation for their role in securing the network.
Another challenger is a restaking mechanism that probes Ethereum economics and network security by putting pressure on staked ETH, which will now secure 3rd-party services on top of the Ethereum blockchain, and introducing its own slashing mechanism.
Still, the effective growth is laid in a symbiotic relationship. The success of applications running on Ethereum's network enhances the core platform's value, similar to how effective state governance benefits their citizen, who in return make the country stronger and wealthier.
Ethereum's interoperability and established network can potentially attract major capital and state players. Its ability to securely operate on a trustless, global scale makes the network an attractive backbone for various operations if overcomes all the challenges.
As the world's first general-purpose blockchain, Ethereum has established and retained its superiority over other L1s, boasting the highest market capitalization and network security by TVL. But will it retain its precedence in the next ten years?
Nobody knows, but let's see. As for myself, I do plan to cover 20 years of Ethereum in another Everstake report.
See you then.
ABOUT AUTHOR
Irina is the Segment Lead at Everstake, overseeing Ethereum and Ethereum-based protocols and solutions. Before setting the anchor at Everstake, she was part of marketing teams in Web2, working for tech corporations such as Microsoft and Google, and contributing to the growth of the artificial intelligence (AI) ecosystem in Ukraine.
Besides Ethereum ecosystem reports, some articles authored by her, and talks on the crypto conferences, you can regularly hear from Irina on @eth_everstake, as she covers not only the latest things around Ethereum and explains novel, complicated concepts in simple words but also touches on the broader landscape that shapes Ethereum we know today and will face tomorrow, including L2s, blobs and sharding, DVT, restaking, ETH ETFs and many more.
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