Over a third of all Ethereum in existence is now locked up in staking contracts. The staking ratio has climbed to 34.4% of total ETH supply, the highest level ever recorded for the network.

Ethereum completed its transition from proof-of-work to proof-of-stake on September 15, 2022, in what the community called the Merge. Instead of miners burning electricity to validate transactions, the network shifted to validators who lock up ETH as collateral.

Since that transition, the amount of ETH flowing into staking contracts has climbed steadily. The 34.4% figure represents the cumulative result of that trend, now nearly three years in the making.

One of the biggest accelerants has been liquid staking. Protocols like Lido allow users to stake their ETH while receiving a liquid token in return, meaning they don’t have to choose between earning staking rewards and maintaining access to their capital.

Previously, staking meant locking up a minimum of 32 ETH with no ability to use it elsewhere. Liquid staking lowered that threshold to essentially zero and opened the door to retail users and institutions alike.

What a 34.4% staking ratio actually means for supply

Staked ETH isn’t sitting on exchanges ready to be sold. It’s committed to securing the network, earning rewards, and generally staying put. The total number of ETH tokens doesn’t change dramatically day to day, but the number available for trading shrinks as more gets staked.

Network security and the validator equation

Higher staking participation directly translates to stronger network security. More validators means more distributed consensus, which makes the network harder to attack. As the staking ratio climbs, the cost of such an attack grows proportionally.

What investors should actually watch from here

Other proof-of-stake networks have staking ratios well above 50%, and some exceed 70%.

There’s also the question of what happens when staking becomes so popular that it starts to concentrate risk. If too much ETH flows into a small number of liquid staking protocols, the decentralization benefits of proof-of-stake could erode. Ethereum’s community has debated potential caps on staking participation for exactly this reason.