The Shanghai upgrade marked a pivotal moment in Ethereum’s transition to proof-of-stake, unlocking one of the most anticipated features: withdrawals of staked ETH. Since its activation in April 2025, the network has seen a significant shift in user behavior, market dynamics, and product innovation around ETH staking. With full withdrawal functionality now live, investor confidence has surged, leading to renewed demand for staking despite initial fears of a mass exodus.
Rising Staking Demand Post-Withdrawal Enablement
For over two years—from December 2020 until the Shanghai upgrade—ETH holders could stake their assets but not withdraw them. This illiquidity acted as a psychological and financial barrier for many investors. However, once withdrawals were enabled, the expected "dumping" scenario did not materialize. Instead, net deposits into staking have exceeded withdrawals, signaling strong renewed interest.
As of May 20, 2025, over 62,932 "queued validators" are waiting to stake ETH, translating to an average wait time of 34 days and 2 hours. In contrast, only 6 validators are queued for withdrawal—effectively zero backlog. This stark imbalance highlights growing demand rather than retreat.
According to OKLink data, total staked ETH rose from 18.01 million at the time of the Shanghai upgrade (April 12) to 18.41 million by May 18—an increase of 400,000 ETH despite the ability to exit. Given Ethereum’s circulating supply of approximately 120 million ETH, this brings the current staking participation rate to 15.47%, up from 15.1% pre-upgrade.
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Room for Growth: Ethereum’s Path Toward Higher Staking Rates
Compared to other major proof-of-stake blockchains like Cardano, Solana, or Cosmos, which boast staking participation rates between 60–70%, Ethereum still has substantial room to grow. Industry experts like Allen, founder of Ebunker, project that Ethereum’s long-term staking rate could stabilize around 40%.
However, full flexibility isn’t absolute. The protocol limits daily withdrawals to about 1,350 validators (equivalent to ~54,000 ETH), meaning large-scale exits may still face minor delays during peak demand. Still, this cap ensures network stability while enabling sufficient liquidity.
Two powerful forces are now converging to support ETH’s price:
- Declining liquid supply: As more ETH is locked in staking contracts, the amount available for trading decreases—creating structural scarcity.
- Deflationary pressure: Since "The Merge," Ethereum has been burning more ETH than it issues through block rewards. Over the past 247 days, the total supply has decreased by 248,000 ETH, resulting in an annual inflation rate of -0.31%.
In early May 2025, network congestion driven by meme coin activity spiked gas fees dramatically—pushing ETH’s burn rate so high that the short-term annualized inflation briefly plunged to -8.3%. This dual mechanism—staking-driven scarcity + fee-driven deflation—positions ETH uniquely among digital assets.
Liquidity Unleashed: The Rise of LSDs
The Shanghai upgrade unlocked over $35 billion in previously trapped value, primarily held in liquid staking derivatives (LSDs) such as stETH and rETH. Before withdrawals were possible, LSDs often traded at a discount due to uncertainty about their redeemability and lack of exit options.
Now, with full redemption guaranteed by the protocol, LSDs are trading much closer to parity with native ETH, reducing impermanent loss risks in decentralized finance (DeFi) pools and increasing their utility across lending markets, DEXs, and yield strategies.
Lido’s stETH has emerged as the dominant player in this space. Thanks to its early mover advantage and seamless integration across DeFi protocols, it now controls a significant share of the staked ETH ecosystem. This “winner-takes-more” dynamic could continue as institutional adoption grows.
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Declining Yields & The Search for Enhanced Returns
While current ETH staking yields hover around 5% APR, increased participation will naturally compress returns over time. Delphi Digital projects that the staking rate could double within 12 months—driving yields down toward 3% in the medium term.
As base-layer rewards diminish, investors are turning to yield-enhancing protocols that build atop LSDs to generate higher returns through diversified strategies.
Case Study 1: Origin Protocol and OETH
OETH is a yield-optimized alternative to traditional LSDs. It combines:
- Base ETH staking rewards
- DeFi yield from lending platforms (Aave, Compound)
- Incentives from Curve, Convex, and other protocols
By aggregating these revenue streams into a single rebasing token, OETH delivers higher effective APY than standard staking, without requiring users to actively manage positions or pay gas fees for reward claims.
The rebasing mechanism automatically increases the OETH balance in users’ wallets over time—offering passive compounding with minimal friction. Audited by OpenZeppelin—the same firm trusted by Coinbase and Aave—the protocol offers strong security assurances.
Users can mint OETH directly at oeth.com or swap ETH for OETH on Curve, making entry simple and efficient.
Case Study 2: EigenLayer and Restaking
EigenLayer introduces a groundbreaking concept: restaking. It allows users to “re-use” their staked ETH as security collateral for additional networks and services—such as oracle networks, rollups, or cross-chain bridges.
In return for extending trust beyond Ethereum’s base layer, restakers earn additional fees and incentives, effectively stacking yields across multiple protocols—all secured by the same initial stake.
Though still in its infancy, EigenLayer represents a new frontier in crypto economic security and yield generation. It transforms passive stakers into active participants in a broader ecosystem of trust-minimized services.
Key FAQs About Post-Shanghai Staking
Q: Did the Shanghai upgrade cause a massive sell-off of staked ETH?
A: No. Despite fears of a withdrawal flood, net deposits have continued to rise—indicating strong ongoing demand for staking.
Q: Is ETH staking still profitable if yields drop to 3%?
A: Yes. Even at lower base yields, combining staking with DeFi strategies (like OETH or restaking via EigenLayer) can significantly boost net returns.
Q: Are liquid staking derivatives (LSDs) safer now?
A: Absolutely. With full withdrawal guarantees post-Shanghai, LSDs like stETH trade near parity with ETH and pose far less liquidity risk.
Q: How long does it take to start staking ETH today?
A: As of May 2025, new validators face a queue of about 34 days due to high demand and protocol limits on daily activations.
Q: Can I lose money staking ETH?
A: While slashing penalties exist for malicious behavior, honest stakers face minimal risk. Price volatility remains the primary risk factor—not protocol failure.
Q: What is restaking?
A: Restaking allows you to reuse your staked ETH as security for other protocols (e.g., rollups or oracles), earning extra rewards while maintaining your original stake.
Final Thoughts: Staking Is Now Core Infrastructure
While much attention focuses on ETH’s price action post-Shanghai, the real story lies beneath the surface—in the rapid evolution of staking infrastructure, LSD innovation, and yield-layer expansion.
We’re witnessing a shift from simple staking to multi-layer yield ecosystems, where capital efficiency and composability unlock new financial primitives. Whether through OETH’s automated yield aggregation or EigenLayer’s restaking revolution, Ethereum is becoming not just a settlement layer—but a hub of programmable trust and return generation.
For holders, the message is clear:
👉 Begin your staking journey now and capitalize on today’s elevated yields before they normalize.
The window of opportunity remains open—but as adoption accelerates and yields decline, early participation offers the greatest advantage. Now is the time to engage with Ethereum’s next chapter: one defined by liquidity, innovation, and sustainable yield.
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