Ethereum Shanghai is an important update that allows ETH to be withdrawn from the Beacon Chain network. In addition, this is also a premise for Ethereum to go to more advanced improvements later. In this article, we will provide an overview and impact of Ethereum Shanghai on ETH holders. Above is the information about Ethereum Shanghai that you need to know, follow along to understand better!
What is Ethereum Shanghai?
Ethereum Shanghai Upgrade is a hard fork upgrade on the Ethereum blockchain network, allowing users to withdraw ETH staking on Beacon Chain. Proposals to be implemented in the Ethereum Shanghai Upgrade include: EIP-4895, EIP-4860, EIP-4855, EIP-4851. The event is expected to take place in March 2023.
According to Ethereum’s roadmap, the important upgrades of this network include: The Merge (taken on September 15, 2022), The Surge, The Verge, The Purge and The Splurge. Ethereum Shanghai Upgrade takes place before The Surge (scheduled for 2023-2024 – focusing on improving transaction speed).
Ethereum Roadmap Overview
Ethereum has officially transitioned from Proof Of Work to Proof Of Stake after The Merge update. Ethereum itself also went from low inflation to deflation mode so remember Bitcoin is still inflationary from day one. So after The Merge, what updates do we have ahead?
- The Surge: This update will replace the old development roadmap of Sharding to EIP-4488 with the centralized technology of Danksharding. Integration of zkEVM from ZkSync, Scroll, Polygon,… and Rollup expansion solution with the goal of reaching 100.00 TPS in the future.
- The Verge: Supports SNARK proof of transaction validators of zkRollup scaling solutions quickly and easily.
- The Scourge: Thoroughly handle MEV-related issues for a better user experience on the network.
- The Splurge: Completed a number of other upgrades to make the Ethereum network smoother.
And the upcoming update, Shanghai Update, will be the stepping stone for the upcoming The Surge update that is expected to take place in 2023. And the Shanghai update is expected to take place in March.
Important Updates In Shanghai Update
The upcoming Shanghai update includes multiple EIPs such as 4895, 3860, 3855, 3651. We will start with each EIP in the Shanghai update.
EIP – 4895
With the update EIP-4895 allows validators to risk staking Ethereum out of Beacon Chain. And there will be 2 options for validators to choose from as follows:
- Partial Withdrawal: With this strategy, the validator can withdraw the entire reward from ETH Staking to the wallet, but the original 32 ETH amount will still stay with BeaconChain and the validators will continue their duties to the network. .
- Full Withdrawal: With this strategy allows the validator to shut down and withdraw the original 32 ETH with the reward
EIP – 3651
WARM COINBASE: This update is related to reducing gas fees for developers on the network (this is not Coinbase in the US).
EIP – 3855
PUSHO Introduction allows to reduce the size of smart contracts to optimize smart contracts and reduce gas fees.
EIP – 3860
Limit & Meter Inicode allows to limit the maximum size of an initcode to 49,192 and add 2 gas for every 32 – byte initcode. This helps to settle all gas fees on Ethereum.
Impact of Ethereum Shanghai Upgrade on Ethereum & ETH Staking
For users and projects Liquid Staking Derivatives (LSDs)
Before Shanghai Upgrade, to participate in staking on Ethereum, users had 2 option:
- Option 1: Stake at least 32 ETH and become validator of Ethereum network. However, not everyone has enough 32 ETH. All staking ETH assets will be locked.
- Option 2: Use protocols belonging to the Liquid Staking Derivatives group (LSDs) such as Stakewise, Lido and Rocket Pool. The user locks ETH (doesn’t need 32 ETH) to the protocol and gets back stETH, or rETH, .. (depending on the protocol). This is a synthetic asset (from the Derivatives array) generated from the original ETH. Users can use them to participate in other DeFi activities provided by the protocol such as lending, yield farming, as collateral, etc.
With the Option 2, users are freed up liquidity. However, these are only assets that are derived from the amount of ETH that has been staked. And they are limited to some of the protocols that support these properties.
After the Shanghai upgrade, users have the option to withdraw their ETH (mainnet) from the Beacon Chain network instead of just depositing and staking. This helps users to be more active (deposits) in investment asset management. This is an opportunity for new users to choose to stake their ETH.
After the end users, the “Staking as a Service” team projects specializing in providing Liquid Staking Derivatives (LSDs) services will be
With the Ethereum blockchain, the Shanghai upgrade is a stepping stone event for The Surge – an important update aimed at maximizing the TPS transaction speed of the Ethereum network. Developers will benefit from reduced gas fees.
For the market
Part of the unlocked ETH will create selling pressure in the spot market. However, it also helps ETH (native token) liquidity become better compared to the period before Shanghai Upgrade.
Ethereum Shanghai Upgrade FAQ
After the Shanghai upgrade, what is Ethereum’s next big event?
The Shanghai upgrade takes place after The Merge (September 15, 2022). This is considered a stepping stone to the big event The Surge (expected 2023-2023). The next big events are: The Verge, The Purge and The Splurge.
How much ETH can be withdrawn per day after Shanghai upgrade?
The answer is: 50,400 ETH
According to information from Ethereum.org’s ETH Withdrawals FAQ document, the number of validators allowed to withdraw ETH per day is calculated according to the following levels: The number of active validators at the time of writing is: 518,853 validators.
Thus, with the current data, there will be 7 validators withdrawing ETH in each epoch. An epoch occurs every 6.4 minutes. Thus, every day there will be 1575 = (7x24x60/6.4) validators withdrawn, this number corresponds to 50,400 ETH (maximum) unstake per day.
Will the ETH price suffer a sharp drop when a large amount is withdrawn?
50,400 ETH (probably) is withdrawn per day (equivalent to about 84.87 million USD, ETH at 1684 USD). This figure only accounts for about 0.634% of ETH’s total 24h trading volume. The amount of ETH withdrawn changes the supply of ETH in the market and can affect the price. However, it is unlikely to have a strong impact in the long run.
How long does it take to receive ETH unstake?
Also according to the Ethereum.org documentation above, the waiting time for receiving ETH after performing the unstake will be calculated according to the following formula:
At the time of writing, there are 518,853 active validators, from which the validator has to wait about ~3.6 days to receive ETH unstake.
The Ethereum Shanghai Upgrade is a significant milestone in the Ethereum network’s development, allowing ETH to withdraw from Beacon Chain. The upgrade includes multiple EIPs that offer different benefits to users and developers, such as reducing gas fees, optimizing smart contracts, and improving the user experience on the network. The upgrade will also pave the way for the upcoming Surge update, focused on enhancing transaction speed. For ETH holders, the Shanghai upgrade opens up new opportunities for active investment asset management, and developers will benefit from lower gas fees. The Ethereum Shanghai Upgrade is an essential step forward in Ethereum’s evolution, and its impact will be felt by all stakeholders in the ecosystem.
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