Ethereum’s network sputters: What now?
- Ethereum’s network effectiveness recently dropped to its lowest level since the Shapella upgrade.
- This resulted from a decline in validator activity on the Proof-of-Stake network.
The Ethereum [ETH] network experienced performance issues on 18 September, with network effectiveness falling to its lowest level since the Shapella upgrade and the percentage of missed blocks doubling compared to the previous 30-day average.
Challenging day for Ethereum infrastructure! We're observing the lowest network-wide effectiveness since Shapella, and double the missed blocks % of the last 30-days average.
— Rated ?✨ (@ratedw3b) September 18, 2023
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Ethereum’s network-wide effectiveness is a measure of how well the Layer 1 (L1) blockchain network is performing. It is calculated by taking the average block time and dividing it by the theoretical block time.
A block is deemed to have been “missed” when the Ethereum network fails to produce a new block on time.
Data tracked by Rated revealed that Ethereum’s network effectiveness fell to a low of 93.5% on 18 September, while its count of missed blocks on that day totaled 130.
Ethereum suffered a decline in validator activity
A further assessment of the chain revealed that the decline in network effectiveness and surge in the number of missed blocks recorded was due to a drop in validator activity.
According to data from Glassnode, Ethereum began to experience an uptick in the number of validators who voluntarily exited the chain’s validator pool on 16 September. By 18 September, the daily count of validators that left had increased by over 250%.
To ensure that the Proof-of-Stake (PoS) network runs optimally, there has to be a high degree of participation by validators on the network. A high participation rate indicates reliable validator node uptime and, thus, fewer missed blocks and superior blockspace efficiency.
On 15 September, validators’ participation rate began to fall, and by 18 September, it slipped to its third-lowest point in 2023. Data retrieved from Glassnode showed that this fell to 98.93%, the lowest since the 96% recorded on 12 May.
Falling validator count suggests…
As the active validator count depleted, the network also experienced a shortfall in the number of new validators onboarded. For context, on 16 September, the daily count of new validators on the Ethereum network fell to its lowest since April.
The surge in validator exits in the past few days might result from ETH’s narrow price movements in the past few months. This is because validator rewards are paid out in ETH, and these returns increase when ETH prices are high.
Read Ethereum’s [ETH] Price prediction 2023-24
Moreover, the Estimated Annual Issuance ROI Per Validator metric showed a consistent fall since the year began. This metric tracks how much ETH a validator can expect to earn each year, based on the number of validators participating in consensus.
Additionally, dwindling ETH prices in the past few months have made it difficult for some validators to remain incentivized.