Shanghai Upgrade Pushes Ethereum Beyond $2,000!

    The Ethereum Shanghai upgrade was finally live on Wednesday, allowing validators to withdraw their staked ETH. This update marks the first major network upgrade since the Merge back in 2022. Over $16 million worth of locked-up ETH is now free for validators to withdraw, which pumped major liquidity into Ethereum’s ecosystem, increasing the value of the cryptocurrency above $2K! 

    What Is the Shanghai Upgrade?

    The Shanghai, also known as Shapella, hard fork is an Ethereum upgrade that continues the network’s transformation from proof-of-work (PoW) to proof-of-stake (PoS) consensus. In order to understand the effects of the Shanghai update, it’s important to highlight the history of Ethereum’s recent events. 

    Ethereum’s Merge

    Thus, the Ethereum network is designed to be scalable, secure, and decentralized. The network started with a proof-of-work consensus. Nodes (then called miners) that participated in the network performed complex mathematical puzzles to verify blocks of transactions. 

    The expensive costs of operating a PoW blockchain, in addition to the environmental damage resulting from the huge amount of computational power needed, the Ethereum network shifted to PoS on its Beacon Chain as a coordination mechanism in 2020. 

    The Ethereum mainnet and Beacon Chain finally got together in a “Merge” upgrade that shifted Ethereum’s PoW consensus to PoS. The network started using validators instead of miners to verify blocks on the blockchain. Validators must stake 32 ETH in order to participate in the validation process. The more ETH a validator stakes, the bigger their chance is to be the next validator. 

    However, ever since the Merge, the staked ETH provided by validators was not redeemable, which made the Ethereum network not a fully operating PoS blockchain, that is until the Shanghai upgrade came along. 

    EIP-4895 Unlock

    The Shanghai Upgrade is a series of upgrades for the Ethereum network, with EIP-4895 being the most notable one. This proposal allows stakers to finally have control over their funds, which means the approximately $16 million in ETH will be unlocked for validators to claim. However, there will be a cap of around 43,200 ETH per day for the withdrawal amount. 

    This means that the entire value in staked ETH cannot be withdrawn all at once. One estimation from Into the Block points out that it will take approximately 60 days for 20% of validators to unstake their ETH. 

    The Ethereum network provides two options for unstaking ETH. The first option is a partial withdrawal for balances in excess of 32 ETH. Here validators can withdraw a portion of their staked ETH to an Ethereum address and still be part of the validation process. The Second option is a full withdrawal where the validator would withdraw the entire staked amount and would stop being part of the Beacon Chain. 

    Other Shanghai Upgrades 

    Although the staked ETH withdrawal is THE update that will make the Ethereum network a fully operational proof-of-stake blockchain, other Shanghai upgrades are worth mentioning. There are four smaller EIPs included in the upgrade that tackles Ethereum gas fees. These include:

    • EIP-3651: Allows access to software used by validators and block builders at a lower gas cost.
    • EIP-3855: Creates a code that lower gas costs for developers.
    • EIP-3860: Puts a limit on the gas cost for developers when interacting with a specific smart contract code.
    • EIP-6049: Notifies developers of the diminishment of a certain code that reduces gas fees.

    Ether Climbs Beyond $2K

    Market analysts were torn about the Shanghai upgrade. The update would place selling pressure on Ethereum that might send it down or up. Many agreed that the upgrade is an overall benefit for Ethereum in the long term since it provides more liquidity to Ether investors. However, many were skeptical about the volatile behavior of ether in the upcoming week. 

    Nevertheless, things seemed to look great for the cryptocurrency as it shot up to $2,106 as of this article. This is the highest level since May 2022. 

    Ethereum pump

    As the upgrade went live, almost 5,600 validators have completely unstaked their ETH. An additional 17,500 validators are waiting in queue for withdrawal. According to Coingecko reports, there are around $16.8 billion in ETH are traded in the past 24 hours. 

    In an interview with CoinDesk, Diogo Monica, president and co-founder of institutional crypto platform Anchorage stated that “investors would be more comfortable locking in ETH, leading to decreased supply. Monica noted that “there’s liquidity on the chain directly.”

    Noelle Acheson, an economist, and author of the “Crypto is Macro Now” newsletter told CNBC that she’s skeptical whether or not the Shanghai upgrade was behind the sudden increase in value. “It seems to be a bet on the overall liquidity outlook. But relief that Shapella did not produce a sharp drop is driving ETH’s outperformance this morning”. 

    Both Bitcoin and Ether are witnessing a sudden pump in values the U.S. dollar is falling behind.


    Please enter your comment!
    Please enter your name here

    Stay in the Loop

    Stay in the loop with blockchain Witcher and get the lastest updates!


    Latest stories

    You might also like...