For a long stretch, ether could be staked but not unstaked. Removing that restriction altered the calculation every participant makes about whether and how much to commit.
A one-way deposit is a different asset
Staking with no exit meant surrendering access for an indefinite period, with no way to reduce the position if circumstances changed.
That is a far heavier commitment than an ordinary yield-bearing position, and it deterred participants who could not accept indefinite illiquidity.
Those who did stake were accepting a term risk with no defined term, which is unusual in any market.
Exits are rate-limited by design
Withdrawals are processed through a queue that limits how much stake can leave in any period, so a mass exit unfolds gradually.
The limit exists to protect the security of the validator set, since an instant departure of a large share would leave the chain vulnerable during the gap.
An equivalent queue governs entry, which means the size of the validator set changes slowly in both directions regardless of sentiment.
Rewards and principal are separated
Accumulated rewards above the deposit are swept out automatically at intervals without requiring an exit from the validator set.
This distinguishes taking income from withdrawing capital, so a participant can realise earnings while remaining active.
It also removed the awkward situation where compounding was impossible and rewards simply accumulated in an inaccessible balance.
Liquid staking derivatives lost part of their rationale
Tokens representing staked positions originally solved the illiquidity problem, letting holders retain exposure while trading a claim on the deposit.
With direct exits available, that specific advantage narrowed considerably, though the derivatives retained their usefulness as collateral and for participants below the deposit minimum.
The discounts those tokens sometimes traded at also compressed, since an arbitrageur could now redeem rather than being forced to sell in the market.
Staking became a comparable position
Once entry and exit both exist, the staking yield can be weighed against other uses of the same capital in the ordinary way.
Participation now responds to that comparison, so the size of the validator set carries information about relative returns elsewhere.
The queues mean the response is slow, which is why entry and exit backlogs are watched as a measure of intent rather than as a record of what has already happened.