At time of writing it would take over a year for a validator’s effective balance to increase from 32 ETH to 33 ETH based on consensus rewards.
We could easily consider making the increment 0.1 ETH for example! we haven’t bundled that with this change, but it could make sense to give better granularity!
And in many jurisdictions there are requirements to pay tax on staking rewards, so the time would be increased proportionately.
This among other reasons is why we initially want to leave the sweep alone! If they want the continuous dust swept for tax reasons, they don’t have to opt-in.
Given that slashing risk is the biggest concern, I’ don’t see why large staking services would consolidate their risk in this fashion.
We have talked to many who said they would! It is 100% a risk adjustment thing, but i think its safe to say that not everyone would choose a ceiling of 32 ETH for their validators if they had the flexibility.
for larger stakers their risk is lower by having multiple individual validators.
Its a risk-reward tradeoff though. Consider a larger validator who ascends that effective balance schedule faster (because larger stakers earn ETH faster), then they have more capital efficiency because they don’t have to do the withdrawal and activation queue. Some staking services may have different risk preferences and would take advantage of the higher capital efficiency.
It might make sense to think about doing some research specifically on the economics at play here for small and large validators. 