The Ethereum Shanghai upgrade is a hard fork that essentially allows Ethereum holders to access staked ether funds. This upgrade aims to improve the Ethereum network significantly. Previously, staked Ethereum tokens were locked with limited functionality compared to unlocked ETH. The Ethereum Shanghai update seeks to change that.
What Is Staking?
To provide some background on what staking means, it is essentially a way for holders of a digital asset like Ether to utilize the asset to generate passive income on the blockchain. In the case of the Ethereum ecosystem, a user would deposit ETH that would be locked up and later lent out to other users. In return, the user gets interest income from ETH in exchange for depositing their assets as part of this staking process.
What's Different About
The Shanghai Upgrade?
The downside of the current system is that staked Ethereum cannot be unstaked until a predetermined release date, but this Shanghai upgrade changes that story completely. Now that users can unstake their Ether at any point, the release of this upgrade could prompt many users to withdraw their staked ETH suddenly. This upgrade is expected to be one of the most significant impact upgrades for Ethereum in recent years and will change the landscape of crypto staking as there is now less risk for stakers.
More On The Shanghai Upgrade
The Shanghai Upgrade was initially scheduled to be launched sometime in late March, but the latest updates have revealed that the release will be postponed by two weeks. Therefore, it is now expected that the release will be within the first two weeks of April.
Many investors expect the upgrade to affect the price of Ether due to the possibility of stakers withdrawing a large amount of Ether. However, it is essential to note that unstaking and withdrawing the ETH is not immediate and will take some time to complete. The withdrawal will have to join an exit queue which will involve a certain period to allow the withdrawal to take place, which means that the amount of unstaked ETH that gets removed will be a gradual process. As a result, many expect this to minimize any impacts of a large amount of staked ETH moving.
Currently, the data shows a considerable amount of staked Ethereum on the blockchain, indicating that staking is very popular and is seen as an excellent way to generate passive income. On the Beacon Chain, roughly 14% of the total ETH supply is staked, making the full value of staked Ethereum approximately $28 billion.
What's Next For Ethereum?
It is unclear if the Shanghai upgrade will increase or decrease the amount of staked Ether in the future, as that is something that only time can tell. The Shanghai upgrade will undoubtedly increase the supply of Ether due to staking withdrawals, which could cause the price to drop. On the other hand, the risk-free nature of staking on Ether now may attract stakers from other blockchains to Ethereum, making the Ethereum blockchain much more efficient.
Ideally and ultimately, the Ethereum Shanghai upgrade will provide more flexible staking options for Ethereum users, potentially leading to better ecosystem performance in the long run.