Ethereum’s staking network is under increasing pressure as validator withdrawals soar to record levels, testing the system’s balance between liquidity and network security.
Recent validation facts shows that over 2.44 million ETH, worth over $10.5 billion, is now queued for withdrawal as of October 8, the third highest level in a month.
This backlog only follows the peak of 2.6 million ETH on September 11 and 2.48 million ETH on October 5.
According to Dune Analytics facts Curated by Hildobby, withdrawals are concentrated on the leading liquid staking token (LST) platforms such as Lido, EtherFi, Coinbase and Kiln. These services allow users to stake ETH while maintaining liquidity through derivative tokens such as stETH.
As a result, ETH stakers now face average withdrawal delays of 42 days and 9 hours, reflecting an imbalance that has persisted since then. CryptoSlate first identified the trend in July.
Notably, Ethereum co-founder Vitalik Buterin has defended the inclusion’s design as an intentional safeguard.
He likened staking to a disciplined form of servicing the network, arguing that delayed exits strengthen stability by discouraging short-term speculation and ensuring that validators remain committed to the long-term security of the chain.
How does this affect Ethereum and its ecosystem?
The long withdrawal queue has sparked debate within the Ethereum community, raising concerns that it could become a systemic vulnerability for the blockchain network.
Pseudonymous ecosystem analyst Robdog called the situation a potential ‘time bomb’, noting that longer exit times increase maturity risk for participants in liquid staking markets.
He said:
“The problem is that this could create a vicious cycle that has massive systemic impacts on DeFi, the credit markets and the use of LSTs as collateral.”
According to Robdog, queue length directly impacts the liquidity and price stability of tokens such as sETH and other liquid staking derivatives, which typically trade at a small discount to ETH, due to redemption delays and protocol risks. However, as the queues at the validators get longer, these discounts become bigger and bigger.
For example, when sETH trades at 0.99 ETH, traders can earn approximately 8% annually by purchasing the token and waiting 45 days for redemption. However, if the grace period doubles to 90 days, their incentive to buy the asset drops to around 4%, which could further widen the peg gap.
Furthermore, because sETH and other liquid staking tokens are collateral for DeFi protocols like Aave, any significant deviation from ETH’s price could ripple through the broader ecosystem. For context, Lido’s sETH alone anchors approximately $13 billion in total value, much of which is tied to leveraged looping positions.
Robdog warned that a sudden liquidity shock, such as a large-scale deleveraging, could force a rapid deleveraging, raising interest rates and destabilizing DeFi markets.
He wrote:
“For example, if the market environment suddenly changes such that many ETH holders want to exit their positions (e.g. a different Terra/Luna or FTX level), there will be a significant withdrawal of ETH. However, only a limited amount of ETH can be withdrawn because the majority is lent out. This could cause a run on the bank.”
Considering this, the analyst warned that vaults and credit markets need stronger risk management frameworks to account for growing exposure to durations.
According to him:
“If the exit duration of an asset varies from 1 day to 45 days, it is no longer the same asset.”
He further urged developers to consider discount rates while pricing collateral.
Rondog wrote:
“Since LSTs are fundamentally a useful and systemic infrastructure for DeFi, we should consider making upgrades to the exit queue throughput. Even if we increased throughput by 100%, there would be enough commitment to secure the network.”
