The Withdrawals are Coming and More Ethereum Roadmap Clarity

Layer-1 Sector Brief

With the focus on The Merge dominating the narrative for so long, many forget we are only a little more than halfway through the Ethereum roadmap. There's still work to be done on scaling, elimination of tech debt, and further reduction of centralization vectors. A few days ago, we received more clarity on the plan for 2023, including key scalability and tech stack upgrades, along with support for Beacon Chain withdrawals.

Withdrawals

The latest All-Core Ethereum developers call revealed a broad consensus that enabling withdrawals for stakers needed to be a priority in early 2023. According to the team, the upgrade should be fairly straightforward, and a delay in enabling withdrawals could create another attack vector for critics and skeptics. The developers finalized a tentative date of March 2023 with multiple test runs / shadow forks throughout January and February. Other development priorities won’t change this target date. Successful dry runs have already been conducted on two testnets, which provides some level of confidence that withdrawals should be arriving in short order.

Enabling withdrawals results in more liquidity for users. While there will be a certain amount of redemptions, it is unlikely this will be a mass-selling event for three reasons:

1. Only 1,575 validators or ~50,000 ETH can exit the active validator set per day. Even if 20% of these validators left, that would roughly equal the estimated selling pressure the network was seeing from miners prior to The Merge.

2. About 60% of total ETH deposited and ~70% of depositors happened prior to this year when The Merge timeline was unclear at best. These are the hardcore HODLers and are unlikely to be immediate sellers.