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Discussion on raising the staking limit from 32 to 2048 ETH, potentially enabling automatic compounding and unlocking a large number of new validators

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Discussion on raising the staking limit from 32 to 2048 ETH, potentially enabling automatic compounding and unlocking a large number of new validators

Ethereum core developers discussed a proposal to increase the ETH staking limit at a consensus meeting. This could unlock a significant number of pending new validators and potentially enable automatic compounding staking rewards, but it may also lead to higher penalties for slashing.

New Validators Queue Too Long

The proposal was put forward by Ethereum Foundation researcher Michael Neuder, who pointed out that fixing the upper and lower bounds of staking to 32 ETH has resulted in a large number of validators. As of June 6, 2023, there are over 600,000 active validators, with a waiting queue of 90,000 validators.

He believes that increasing the staking cap could remove barriers to future consensus layer upgrades, improve the performance of the consensus mechanism, and enhance the operational efficiency of both small and large validators.

Implementing Automatic Compound Rewards

Neuder also mentioned that increasing the staking cap could enable automatic compound staking rewards.

Currently, any staking rewards exceeding the 32 ETH cap must be restaked. With staking 32 ETH at an annual 6% interest rate, validators would need over 11 years to earn another complete 32 ETH and stake it again.

Breaking the staking cap could address this issue and help large stakers reduce the operational costs of managing a large number of validators.

Previously, we analyzed and compared various staking operation profits in different quantities and conditions for ETH staking:

ETH Staking Analysis: Independent Staking vs. Liquidity Staking Derivatives LSD, Which Profit is Better Under Different Conditions?

However, Neuder also warned of potential risks associated with breaking the cap, including higher penalties for accidental double proposals or slashing.

This proposal is still under consideration, and developers have stated that they will further discuss the implementation details on community platforms.