Rise in Ethereum validators sparks technical capacity concerns, warn Fidelity
In a recent research report by asset management giant Fidelity Digital Assets, concerns have been raised regarding the rise in the number of validators on the Ethereum blockchain following the Shapella upgrade last April. The Fedilty report highlights potential challenges in technical capacity and centralization as the validators count continues to soar.
Fidelity Digital Assets’ report regarding rise in the number of validators
Since the Shapella upgrade, which introduced the ability for validators to withdraw their staked ether (ETH), the active validator count has surged by a staggering 74%, Fidelity noted. Analyst Daniel Gray emphasized that while increased liquidity has lowered risks, future upgrades could face hurdles with the growing validator set.
Gray explained that in a network with a large validator set, bandwidth and latency play critical roles, with each validator needing to swiftly download and verify the latest data and state changes. As the data size expands, so does the computational power required for processing transactions within tight timeframes.
Moreover, the addition of each new validator further strains the network’s bandwidth requirements for maintaining consensus, potentially leading to increased centralization. Gray warned that household validators struggling to keep pace could drop out, leaving institution-owned data centers as the dominant players.
Although the growth rate of the validator set has recently slowed, the report highlights the uncertainty surrounding future trends. The possibility of rapid growth in the coming year presents risks of centralization and bandwidth challenges, the report cautions.
While an expanding validator count typically signifies upgraded adoption and blockchain security, predicting future staking demand remains elusive. Fidelity Digital Assets urges caution in addressing the implications of a rapidly growing validator count on the Ethereum network.
Ethereum price performance analysis
Currently, the biggest altcoin, Ethereum, is trading near $3,600, and in the last 24 hours, it experienced a price surge of over 1.35%. However, since the morning of March 28, 2023, Ethereum has been experiencing downside momentum, but in the past few hours, it experienced a price surge of over 1%.
If we look at Ethereum’s performance over a longer period, in the last 7 days, its price experienced a decent 1% upside momentum. Whereas, in the last 30 days, Ethereum’s price experienced an upside momentum of over 9%. Additionally, the world’s biggest cryptocurrency, Bitcoin, experienced a price surge of over 2.5% in the last 24 hours, whereas in the last 7 and 30 days, it experienced a price surge of over 5% and 17%.
