The Shanghai Upgrade is Completed. What Comes Next for Ethereum?
Ethereum stakers can redeem their share of staked Ethereum following its most recent upgrade that occurred on April 12. The Shanghai Upgrade, also called Shapella, is recorded as stopping one of the longest waits in Ethereum’s history. This event doesn’t only mark a significant milestone for future Ethereum-based projects and its underlying technology. Despite concerns that Shanghai would lead to a decline in the Ethereum price, what happened was exactly the opposite. The second largest cryptocurrency has risen significantly after the “Capella” and “Shanghai” were finally carried out on the blockchain, as investors considered how positively the event will impact Ethereum in the long run. This led to a price surge, breaking the $2.000 barrier for the first time since June 2022, which comes as a relief after the harsh times when crypto bit their lips, doubting whether their investments would turn profitable soon enough. Investors held high hopes that the Shanghai upgrade would be more than a “nonevent” and turned bullish for their asset’s price, which happened in the few hours following the upgrade.
Shapella follows in the footsteps of what has to be the most ambitious upgrade so far – the Merge. It refers to the switch from the power-hungry Proof-of-Work consensus mechanism to the environmentally-friendly Proof-of-Stake system. Simply put, it represents the merger between the mainnet and a new network that reduces energy consumption called Beacon Chain, decreasing operations’ energy consumption and CO2 footprint by around 99.95%.
The series of improvements on the blockchain doesn’t end here. The long-awaited crypto unlock has several ramifications for the whole crypto industry, which may give a glimpse into Ethereum’s future.
Ethereum Stakers Can Welcome Their Previously-Locked Crypto
The employment of the new consensus mechanism grants investors newly-created tokens after they lock up their ETH in smart contracts. The likelihood of a participant being chosen by the network to process transactions and receive freshly-minted tokens grows with the quantity of Ether staked.
Because validators must understand the necessity to implement and endorse this revolutionary method, Ethereum increased interest rates to 5% for any ETH owner who’d stake significant amounts. While the developers’ plan was a success, stakers needed to accept that they couldn’t get their funds back until they were given permission. Therefore, the Shanghai upgrade represents developers’ authorization for participants to unstake their tokens from the blockchain.
The Number of Requests to Withdraw Funds Exceeded Expectations
Unsurprisingly, many investors rushed to take their Ethereum back after the successful implementation of the Shanghai upgrade. However, the number of stakers asking permission to redeem their tokens from the blockchain was so high that the queue to receive them had reached 14 days. This isn’t what some blockchain analysts would’ve anticipated before the upgrade’s completion. According to many adepts of this technology, they expected the wait to last anywhere from a few hours to a few days, but not two weeks.
According to a data dashboard sponsored by the Ethereum Foundation, the number of stakers waiting to access their funds revolved around 17,000. Other researchers make other estimates, depending on the type of withdrawal expected: full or partial. The former represents the retraction of all the Ethereum staked required to join the staking club, meaning 32 ETH. Meanwhile, only part of the original deposit is removed when a partial withdrawal is requested.
So far, more than one thousand participants have made full withdrawals, successfully exiting the blockchain. However, there’s a discrepancy between the number of participants regaining control of their locked tokens and the number of newbies looking to join the staking sphere. While many validators’ want to regain control of their funds, increasingly more newcomers are looking to learn about this technology and discover how they can take advantage of it in order to join Ethereum’s maintenance team. It represents a good opportunity for long-term profits and a chance to acknowledge the many complex features of this revolutionary technology.
Research about the Shapella upgrade is continuously conducted as more providers of liquid staking services transfer the required amounts of ETH to validators’ wallets.
Other Features Implemented By Shapella
The Shapella Upgrade goes beyond empowering stakeholders to take control of their funds and implements Ethereum Improvement Proposals, a series of improvements aiming to decrease fees on Ethereum. The ones responsible for limiting transaction charges for technical applications are also the most noteworthy ones, including EIP-3855 and EIP-3651.
Here, the distinction between Shanghai and Capella must be made. Shanghai only intends to transform the layer responsible for execution on the blockchain, which handles protocol rules and smart contracts.
On the other hand, the Capella upgrade concerns the consensus layer that verifies the participant’s compliance with the rules proposed by the execution layer.
The entire set of updates is known as Shapella, representing a combination of the two upgrades mentioned above. Similarly, Ethereum’s Merge, completed in September 2022, is also broadly called “Ethereum upgrades”.
Proto-Danksharding – The Next Major Milestone in Ethereum’s History
After the transition from the Proof-of-Work and the upgrade that permits validators to exit the Beacon Chain, another critical improvement to the blockchain is to be witnessed. One of the highly anticipated advances for Ethereum, proto-dank sharding, is expected to happen later this year. EIP-4844 (proto-dank sharing) aims to give birth to a new type of transaction and a blob (an extra field to store data). This blog seeks to reduce unsustainable transaction fees and improve the blockchain’s block creation capacity.
The purpose behind the EIP-4844 is to cut the gas fees on the network and eventually create a safer space for the next generation of participants to join in.
Last Words
Ethereum’s prospects, in the long run, remain promising. The following improvements on the blockchain are expected to boost interest in the cryptocurrency as it proves itself as a reliable project. Looking at Ethereum through long-term glasses, the upgrades might bring more crypto-savvy individuals to the table as they minimize transaction fees, improve the network’s efficiency, and lay the groundwork for implementing other updates, making it easier for anyone owning Ethereum to contribute to management efforts.
