10% of ETH’s Supply Locked in Consensus Layer Deposit Contract

The deposit contract for Ethereum’s consensus layer, formerly known as ETH 2.0, has exceeded 12 million ETH, worth nearly $34 billion at current prices. This means that more than 10% of the entire Ethereum supply is now locked in the consensus layer deposit contract.

Progress in Ethereum’s Merge

Despite shaky price action, and what appears to be a delayed Merge date, the appetite to help secure the Ethereum network as it transitions from Proof-of-Work to Proof-of-Stake continues to grow.

According to Etherscan, the Ethereum consensus layer deposit contract has reached the 12 million ETH mark, which accounts for more than 10% of Ethereum’s entire circulating supply. This represents a rapid rate of growth, as the deposit contract hit 10 million ETH on Mar. 10.

There are currently over 360,000 validators, each of whom put up at least 32 ETH. The deposit contract currently yields an estimated 4.5% yearly return, though, once locked, funds will not be fully releasable until the Shanghai upgrade that is currently slated for later this year.

The consensus layer deposit contract allows for Ethereum to be moved from the Ethereum mainnet, recently dubbed the execution later by the Ethereum Foundation, to the Beacon Chain. The Beacon Chain is a parallel-running Proof-of-Stake version of the Ethereum blockchain that launched in December 2020.

The long-awaited Merge describes the moment that the Ethereum mainnet, or the execution layer, merges with the Beacon Chain, or the consensus layer. This marks the network’s transition from Proof-of-Work, where transactions in blocks (in the blockchain) are validated via the solving of complex mathematical equations using computing hardware, to Proof-of-Stake, where transactions are validated by validators, who stake their funds on the network. The Merge was thought to be on schedule to take place this June, but has since been delayed.

Trent Van Epps of the Ethereum Foundation has emphasized that not only should the Merge make the chain more secure, but it also is estimated to reduce the Ethereum network’s energy use by up to 99.95%. Moreover, the Merge could reduce annual issuance of Ethereum to net 0%, down from the current net 3-5%.

In addition to the more than 12 million ETH now locked in the deposit contract for the Beacon Chain, approximately 2.18 million ETH have been destroyed since Ethereum Improvement Proposal-1559 was launched in the London Hardfork last August. That upgrade sought to stabilize network transaction fees and introduced a base fee Ethereum burn.

Disclosure: At the time of writing, the author of this piece owned BTC, ETH, and several other cryptocurrencies.