The Protocol

Welcome to The Protocol, CoinDesk’s weekly wrap of the most important stories in cryptocurrency tech development. I’m Margaux Nijkerk, a reporter at CoinDesk.

In this issue:

• Ethereum Faces Validator Bottleneck With 2.5M ETH Awaiting Exit
• Is Ethereum’s DeFi Future on L2s? Liquidity, Innovation Say Perhaps Yes
• Ethereum Foundation Starts New AI Team to Support Agentic Payments
• American Express Introduces Blockchain-Based ‘Travel Stamps’

Network News

ETHEREUM VALIDATOR EXIT QUEUE FACES BOTTLENECK:

Ethereum’s proof-of-stake system is experiencing significant challenges, with approximately 2.5 million ETH, valued at $11.25 billion, currently awaiting exit from the validator set. The backlog resulted in wait times exceeding 46 days as of September 14, the longest recorded in Ethereum’s staking history. The situation was exacerbated when Kiln, a large infrastructure provider, opted to exit all its validators due to recent security concerns, adding approximately 1.6 million ETH to the queue. While not directly related to the staking protocol, this decision impacted confidence within the community. As stakers take profits from ETH’s 160% rally since April, the uptick in validator entries complicates exits, as the protocol limits how many validators can exit at once. Currently, stakers face about 44 days before reaching the cooldown step.

IS L2 DEFI EATING AT ETHEREUM’S L1 DEFI?:

Despite recent highs for Ether, decentralized finance (DeFi) activity on Ethereum’s layer-1 appears subdued compared to late 2021. Fees collected in August were $44 million, representing a 44% decline from the previous month. Conversely, layer-2 (L2) networks like Arbitrum and Base are thriving, showcasing $20 billion and $15 billion in total value locked (TVL) respectively. The observed divergence raises questions about whether L2s are cannibalizing L1’s DeFi activity or if the ecosystem is maturing into a multi-layered financial structure. Industry experts argue that metrics should reflect Ethereum’s evolving role as a foundational layer for high-value issuance and institutional activity rather than focusing solely on L2 metrics.

EF STARTS DECENTRALIZED AI TEAM:

The Ethereum Foundation (EF) is launching a new artificial intelligence group to position Ethereum as the backbone of the “machine economy.” This initiative, announced by research scientist Davide Crapis, will focus on enabling AI agents to function autonomously and building a decentralized AI framework that avoids centralized corporate control. The EF aims to support Ethereum development, funding upgrades, and fostering community collaboration. This new team represents the Foundation’s shift towards specialized units addressing emergent tech developments.

AMERICAN EXPRESS DABBLES IN BLOCKCHAIN TRAVEL STAMPS:

American Express has unveiled Ethereum-based “travel stamps”, designed to commemorate travel experiences. These NFTs (ERC 721 tokens) are minted on Coinbase’s Base network but currently lack tradable or loyalty point functionalities. According to Colin Marlowe, Vice President at Amex Digital Labs, the stamps will enhance customer travel experiences without generating direct revenue. The travel app will also feature various tools and services to enrich user experiences.

In Other News

• Centrifuge and Plume launched the Anemoy Tokenized Apollo Diversified Credit Fund (ACRDX) backed by a $50 million anchor investment, providing blockchain investors access to diversified credit strategies on-chain. — Ian Allison Read more.
• Google introduces a new open-source protocol enabling AI applications to transact, incorporating stablecoin support through collaboration with Coinbase and other major players. — Oliver Knight Read more.

Regulatory and Policy

• Faryar Shirzad, Coinbase’s Chief Policy Officer, claims stablecoins do not threaten the financial system and asserts that banks’ contentions are rooted in defending their profits. — Jesse Hamilton Read more.
• SEC Chair Paul Atkins announces plans to modernize U.S. securities regulations, recognizing the operational landscape for crypto and ensuring clarity for tokens and platforms under SEC oversight. — Siamak Masnavi Read more.

Calendar

• Sept 22-28: Korea Blockchain Week, Seoul
• Oct 1-2: Token2049, Singapore
• Oct 13-15: Digital Asset Summit, London
• Oct 16-17: European Blockchain Convention, Barcelona
• Nov 17-22: Devconnect, Buenos Aires
• Dec 11-13: Solana Breakpoint, Abu Dhabi
• Feb 10-12, 2026: Consensus, Hong Kong
• Mar 30-Apr 2: EthCC, Cannes
• May 5-7, 2026: Consensus, Miami