As is tradition, let’s start with an explanation. Stacking in the Etherium network does exist, but only as part of the Beacon Chain, which operates based on the Proof of Ownership or Proof-of-Stake consensus algorithm. A feature of Eth staking is the inability to withdraw cryptocurrency before the current chain switches to PoS. This is tentatively expected to happen in the autumn of this year.

Etherium versus other cryptocurrencies

That said, the staking itself started in December 2020. Which means that since then, those wishing to participate in the massive update of Etherium have allocated as much as 32 ETH, if they wanted to be validated without intermediaries, and sent them to the appropriate deposit contract. Now the market has collapsed significantly – so investors are suffering losses.

How cryptocurrencies are losing money

The price of ETH at its altcoin peak was $4,891 in November 2021, with the value of coins in the Ethereum 2.0 deposit smart contract then hitting $39.7 billion. By today, it has fallen to $25.65 billion. This is even despite the fact that an additional 5 million ETH has been transferred to the smart contract since November.


That is, the dollar equivalent of the coins in the Ethereum stack has now become noticeably smaller, although there are a lot more ETH themselves. As you can easily guess, the collapse of the cryptocurrency, which was accompanied by the collapse of the rest of the market, is to blame. Consequently, stackers are well positioned for so-called hodgepodge, as all they can do under the circumstances is suffer losses and wait for the market to improve.

It's important to understand that it was known in advance that ETH could not be withdrawn from the stack before the final refresh of the Etherium network. Consequently, investors were aware of the risks, but still chose to part with the coins indefinitely. Obviously, such a financial sacrifice is not fatal for them, and participating in the global renewal of this blockchain is a higher priority.


Etherium exchange rate over the past year

As a reminder, the Ethereum 2.0 deposit smart contract is being invested in by validators of the alternative ETH network. Etherium itself should soon switch to the second version of the protocol with support for the Proof-of-Stake algorithm. The miners will be replaced by validators, who will earn income from confirming transactions, with their deposited coins serving as collateral.

The data from Glassnode is pretty sad – the vast majority of coin holders in the smart contract are incurring unrealised losses. Here’s a relevant quote from the analysts.

After the price of Etherium plunged more than 78 per cent, and given the inability to withdraw coins, only 17 per cent of coin owners are now in profit.

Accordingly, those 17 per cent stake holders have bought Ethers cheaper than today's rate of $1,220. And for them, the wait is not a big problem.

The value of ETH in a deposit smart contract

According to Decrypt’s sources, the average such investor suffers a loss of up to 55 per cent of the value of its coins. And given the fact that the coins have been lying in the smart contract all this time, future validators have also made unrealised profits, which were seen before the market peaked at the end of 2021. However, their on-air balance has increased over the time of the stakeout, taking into account the stakeout fees.

On topic: What happens if the Ethereum 2.0 network tries to be attacked?

Meanwhile, the final transition to Ethereum 2.0 is making progress, with the merge or so-called The Merge being conducted in test mode on the Sepolia test network. As a reminder, a merge is the term used to refer to the moment when an existing PoW chain and a PoS-based Beacon Chain are combined. Admittedly, Sepolia’s testing itself was not without incident.

Overall, the merger testing was successful, save for the fact that 25-30 per cent of validators suddenly went offline due to “configuration issues” with the software. This was confirmed by Etherium developer Terence Cao on his Twitter. However, according to him, everything eventually worked out, and the date of the procedure on the main cryptocurrency network will not be postponed specifically because of the incident.

It should be noted that now the developers are orienting on the merger tentatively in mid-to-late September. However, things could eventually change.

Testing in Sepolia was streamed on YouTube. In particular, during the stream, one of the founders of the ETHStaker community under the pseudonym Superphiz warned that the actual success of the merger will only be known “in a few hours or even 24 hours”. The final phase of testing will take place on Goerli’s test network. Superphiz added that the timing of the new tests will depend on Sepolia’s test results.

During the live stream, Ethereum creator Vitalik Buterin admitted that one of the challenges developers will face during the merger on the main network could be the presence of “a lot more third-party infrastructure that is not on the test networks.” Here’s his rejoinder, cited by Cointelegraph.

There may be non-critical issues during the merger that we don’t have time to catch with these tests. There are many different factors that simply aren’t taken into account during the tests. This is inevitable and quite normal.

Vitalik Buterin, the creator of Etherium


We believe that the inability to withdraw cryptocurrency from stacking on the Etherium network is an uncomfortable feature that just leads to situations like the current one. However, it was easy to predict such a scenario, so investors clearly knew what they were getting into. Besides, sooner or later they would get their hands on the coins. Maybe, by that time ETH will go up again.


Recall, final migration to Ethereum 2.0 will be done within next few months, so not much time left until the event itself. Follow the news of the most popular altcoin ecosystem in our millionaires cryptochat. We discuss this and other news there.