Investors in cryptocurrency are experiencing delays in withdrawing funds they deposited on the Ethereum blockchain after a major software upgrade known as “Shapella.”
This highlights ongoing challenges for Ethereum as it aims to become widely used for instant payments.
Over $30 billion worth of ether, the second largest cryptocurrency, was expected to be unlocked by the upgrade. However, until Wednesday’s upgrade, investors could not withdraw their funds via a process called “staking” on the Ethereum blockchain.
As of Thursday, around $1.4 billion worth of ether was stuck in a withdrawal queue, according to data firm Nansen.
These delays demonstrate the limitations of Ethereum’s transaction processing capabilities, raising concerns about its potential shortcomings as it strives to become a mainstream financial infrastructure.
The Ethereum Foundation, which represents the network, has not yet commented on the situation.
Nansen analyst, Martin Lee explained that the delays were due to the security measures in place, which limit the number of validator withdrawals to 1,800 per day or 57,600 ether worth of exits per day (roughly $115 million).
While Ethereum has gained popularity in offshoots of the crypto market, such as decentralized finance and non-fungible tokens, it has yet to be widely used in mainstream finance, commerce, or payments.
He said, “In an extreme scenario if there’s no limits, and a large majority of validators exit, the Ethereum network would be vulnerable to attacks and bad actors.”
Binance, a major cryptocurrency exchange, announced that users would be able to withdraw their ether from its staking product starting April 19th, but it may take “15 days to several weeks” to process these transactions.
Binance said on its website, “Due to the processing limitations on the Ethereum network, Binance will set a daily ETH redemption quota for each Binance user.”
Lee from Nansen predicts that the backlog will likely take weeks to clear, and depending on the average daily “unstaking” amount, it could take just a few hours or a couple of days.
