A decisive event for the fate of Ethereum is going to happen: the Shanghai-Capella, or Shapella, upgrade. And although it was initially due to release this month, Ethereum core developers have pushed it to early April. However, the hype is real, and every crypto community member is talking about this much-anticipated Shanghai hard fork.
The Ethereum Shapella upgrade is going to bring some serious changes. It’s believed to be the final touch on the platform’s Proof-of-Stake (PoS) transition, the one that would finally give users access to their stakes ETH funds. Ever since the release of the PoS-driven Beacon Chain in December 2020, everyone who sought to be a validator on this bright new network had to allocate a part of their assets toward the network. The staked coins were thus locked for an indeterminate period of time, making users doubt the safety of their ETH. However, with the upcoming Shapella upgrade, things are about to take another turn. The hard fork is not only likely to enable ether holders to withdraw their tokens, earn rewards of newly created tokens, and perform transaction validations – it could also push the ETH price to new heights. This makes crypto a luring investment for many people willing to put their money into an ROI-generating asset. You can check today’s Ethereum price on the Binance exchange platform and see for yourself the crypto’s price history since the latest significant upgrade in Ethereum’s history. This will give you insight into what the next big upgrade could do and whether it’s worth it or not.
For a deeper understanding of the Ethereum Shanghai upgrade, read on:
Ethereum Shapella Upgrade: Explained
The Ethereum Shanghai upgrade is the culmination of the platform’s latest attempts to switch to a PoS consensus mechanism. As previously mentioned, with the launch of the Beacon Chain in December 2020, user staking has begun to be coordinated, limiting holders in a lot of ways. Then, another great event was to change the fate of Ethereum for good – The Merge. It was that upgrade that eventually made the Ethereum blockchain a PoS-oriented one. But even if this transition went through numerous test checks to achieve perfection, it couldn’t cover the all-time issue of cost. The minimum amount of ethers needed for staking was still 32 ETH, which, at that time (remember that the ETH price reached almost $4,000 in the past), was unreachable for many. Moreover, users couldn’t withdraw staked ethers, as their funds were locked for an indefinite period of time.
This is where the Shanghai upgrade comes into play. It is aimed at changing how users get access to their staked ETH and reducing costs, as well as bringing several important improvements and other minor ones to the network. The most significant Ethereum Improvement Proposal (EIP) is undoubtedly the one that will allow users to withdraw their staked tokens, EIP-4895. However, looking into some other EIPs will give you a more comprehensive picture of the Shapella upgrade’s full potential.
EIPs
Apart from the much-awaited EIP-4895, there are some other noteworthy proposals, including:
- EIP-3651: Warm COINBASE – during this upgrade, the COINBASE addresses will turn from ‘cold’ into ‘warm’ and gas fees will be considerably minimised for network builders.
- EIP-3855: PUSH0 Instruction – this proposal targets the smart contracts on the Ethereum Virtual Machine (EVM), which will become smaller and based on more advanced code.
- EIP-3860: Limit and Meter Initcode
- EIP-6049: Deprecate SELFDESTRUCT
In addition to these EIPs, EIP-4844 was also intended, but it’s not going to happen until 2024. This proposal is meant to enhance scalability by sharding data, introducing what developers call ‘protodanksharding’.
What Investors Need to Know
As you see, this upgrade comes with lots of improvement promises, so it’s no wonder that it’s so highly anticipated. However, this doesn’t mean it’s all fine and dandy. In case you don’t know, more than $17 million in ethers were staked after the upgrade in September 2022, which is clear proof that people will want to unstake their tokens as soon as the Shapella upgrade is live. But this won’t be possible, partly because of the large amounts of money at stake, partly because this would cause an all-time migration of validators out of the blockchain. That’s why a cap of approximately 43,000 ETH a day will be available for withdrawal. This, nevertheless, doesn’t mean validators can’t unstake their coins but that they’ll have to wait in this respect. And it’s only normal to be so – changes don’t happen overnight.
Of course, this all depends on what kind of participant you are on the Ethereum platform. If you’ve never staked ETH as a validator on the Beacon Chain, the Shapella upgrade shouldn’t impede you from withdrawing ethers staked on a particular exchange.
You also need to know that the Ethereum Shapella upgrade release date might come later than initially announced. That’s because such a major change must undergo several tests to rise to the occasion. Being projected to happen as early as March 2023, Ethereum core developers have postponed the big event until no sooner than early April – experts predict that it will happen on 12 April, but this remains to be seen.
Impact on ETH price
Since a new era of unlocked ethers is concerned, investors and traders are wondering how the upgrade is going to impact the ETH price. Some voices are bullish, while others are bearish, so what to expect? Most probably, the Shanghai upgrade will result in a selling wave, hence a price surge. With the upgrade set to provide more staking options, experts are ambitious regarding Ethereum’s value.
On the other side of the coin, there also exists a probability of prices falling. When users start to withdraw their ETH staked, considerable liquidity could flood into the open market, leading prices towards a lower level.
Final Thoughts
The Ethereum Shanghai upgrade comes with lots of advances and much hope among stakers. There are many EIPs on the horizon, likely to leave a forever mark on the Ethereum blockchain.
