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Ethereum Staking Popularity on the Rise, Ether (ETH) Loses Grip of $1,300 Price Mark

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Ethereum mainnet successfully integrated with Beacon Chain last month, bringing the entire chain to a proof-of-stake consensus model that has made the new network iteration up to 99.9% energy efficient. The project's co-inventor Vitalik Buterin confirmed that the next objective is addressing the scalability issue that is part of the blockchain trilemma. Speaking at Circle's Converge22 conference a fortnight ago, Buterin emphasized the need to focus on solving the challenge as it would make interactions with the chain friendly.

“I think that it's important to keep hammering on scalability as an issue, because it is really central to the problems that are preventing a lot of the cryptocurrency and blockchain applications that we dream of going mainstream,” Buterin told Circle CEO Jeremy Allaire at the event held in San Francisco between Sept. 27-30.

Earlier at the 2022 Messari Mainnet conference on Sept. 23, the Ethereum co-founder specifically earmarked sharding as an item of near-term focus for the development team.

Proof-of-stake Era

The PoS model relies on a staking mechanism to validate transactions, where holders seeking to become validators deposit a stake (32 ETH) locked in a smart contract to gain the validator status. This is in contrast with now-deprecated proof-of-work, where the equivalent are miners.

In addition to energy efficiency, other compelling arguments for PoS over PoW include faster transactions, reduced hardware equipment and less ETH issuance needs.

PoS vs Simulated PoW metrics for the same period data shows that issuance has realized the projected figures in the post-Merge environment.

Declining GPU prices

Observers have also noted a significant dip in graphic processing unit (GPU) prices across global markets. The switch to PoS, which can be viewed as a technical and industrial upgrade of some sort, rendered Ethereum-centric GPU mining rigs obsolete.

Local outlets in China reported in the aftermath of the Merge that GPU prices had slumped to new lows on account of little appeal in them. The South China Morning Post reported at the end of last month that retailers in Shanghai had to sit on unsold graphic units that were at one point in high demand by miners despite their conventional suitability for gaming.

Some migrating miners turned to other networks like Ethereum Classic to remain in business, but the latest data shows a significant volume of those that joined have left. Ethereum Classic hash rate rose sharply ahead of the Merge, briefly grazing 300 TH/s. This figure has reduced by almost half since then, and though the current approximation of 150 TH/s represents a significant decline, it is still more than twice the average hash rate pre-Merge.

Industry experts reckon that a significant number of Ethereum-centric GPUs remain out of use at the moment due to unsustainable operating costs.

“The cryptocurrency mining market has a huge number of idle GPUs and the revenue from traditional mining cannot support their running costs, so they are shutting down and facing the choice of waiting for new mining opportunities or selling them second-hand.,” ZK. Work's pseudonymous CTO, Crypto White, remarked in a recent interview with CoinTelegraph.

There are expectations that the GPU market will recover especially given the availability of other protocols that can equally work with these units. Commenting on the matter, Farcana CEO Ilman Shazhaev also pointed out that “the gradual embrace of metaverse-centric innovations” will also ensure the supply of GPUs in the market is matched by demand. This, he justified, citing the projected high demand for these units to power metaverse setups such as gaming consoles.

Ethereum staking: Cumulative deposits cross 14M ETH

The Merge and consequent dereliction of the Ethereum mining sect in the PoS era are some of the reasons why Ethereum staking has become a popular subject.

Despite the wider crypto market being in a long-term bear trend, interest in staking has remained high. The Beacon Chain deposits totaled 14,192,887 ETH at writing, translating to an 11.76% staked share of ETH supply, according to Dune Analytics data. The deposited supply is worth $18.5 billion at current Ether prices.

Staking has also proved more profitable than just holding ETH, thanks to the provision of liquid staking assets by exchanges (Coinbase) and other issuers (Lido). This is because they allow holders to earn rewards and get direct exposure to the market simultaneously. Following the completion of the Merge, Ethereum co-founder Vitalik Buterin unveiled his PoS book, which explores the consensus mechanism. The book ‘Proof of Stake (The Making of Ethereum and the Philosophy of Blockchains)' also gives an account of the history of the blockchain.

Ethereum (ETH) price retreats below $1,300

Ethereum's native token disappointed bull expectations of a price recovery fueled by the Merge hype. The token has struggled to make ground since seeing a steep price descent leading to the Merge date. CoinMarketCap data shows that Ether has lost roughly 27.50% in one month from $1,765 on Sept. 10.

ETH/USD 30-day trading chart

Over the weekend, the Ethereum network recorded the biggest daily growth this year as the number of new addresses on Ethereum spiked on Saturday. Market intelligence platform Santiment observed the surge noting in an Oct. 9 Twitter post that more than 135,780 new wallet addresses were created on the network on Saturday. The new daily high represents an 11.1% increase compared to the second biggest day for network growth this year, Jan. 3. This swell is a solid pointer of the growing real-life utility of the network, which in the opinion of Santiment analysts could “foreshadow potential asset breakouts.”

To learn more, check out our Investing in Ethereum guide.

Sam is a financial content specialist with a keen interest in the blockchain space. He has worked with several firms and media outlets in the Finance and Cybersecurity fields.