Let’s talk about the Ethereum update that is almost here – it’s called the Shanghai network and it will allow network validators to withdraw ETH coins from staking. This article will help you to understand the potential of this event and to figure out how it may influence the market value of the Ethereum cryptocurrency.
Shanghai update
The Shanghai update is a fork of the Ethereum network that will finally allow stakers and validators to withdraw ETH from the Beacon Chain. Until now such a feature was unavailable, the first coins were locked in 2020. This update could theoretically impact the market value of the ETH. With this update, the network becomes full-fledged in terms of PoS consensus – it will be possible not only to stake, but also, if necessary, to make the asset liquid.
Staking allows participants to earn rewards as long as their coins remain locked in the network. However, before the update, users cannot withdraw their ETH from the network, at the moment the system only works in one direction. The ability to withdraw ETH from staking is the most significant task of the update, but there are also a number of other less-noted changes coming.
Features of the Shanghai update
Any major Ethereum update consists of one or more EIPs, which can make the network even better:
- EIP-4895 – starts the mechanism for withdrawing ETH coins from staking. This update was awaited by everyone who deposited their own coins as validators.
- EIP-3855 – increases the speed of transactions. It contains a new instruction for the EVM, which helps to reduce the size of smart contracts and optimize the contract code.
- EIP-3860 – optimizes transaction fees.
- EIP-3651 – reduces the cost of creating blocks.
The Shanghai update is another step towards improving the scalability of the entire network. According to previously announced plans, there will be other major upgrades in 2023. We should expect the introduction of sharding, which is designed to segment the Ethereum network in order to significantly increase the scaling potential of the ecosystem.
When will the update be released?
On March 23, Ethereum developer Tim Beiko set a date of April 12 for the long-awaited Shanghai update. Its testing took some time, and in early December of 2022 the developers indicated March as the estimated launch time. Before the fork is deployed to the main Ethereum network, a few test-launches should be done on the Sepolia test network and on the Goerli network.
How ETH will be withdrawn from staking
All ETH coins received as rewards can be withdrawn to wallets in the first days after the update. The number of such coins is close to 1 million ETH. Given the current value, there are reasonable doubts about the massive one-time drain of the entire volume. Investors understand that selling coins at the current price, after a long bearish trend, is not very profitable.
The withdrawal of ETH will not occur precipitously, this procedure will be gradual and will take some time. So, at the protocol level, there will be restrictions on the withdrawal of ETH for a certain period of time ~ 43,200 ETH per day after the implementation of the Shanghai update.
Considering the data below, in terms of the amount of ETH on exchanges, such volume will not be able to have a significant impact on the market price of the asset. However, the expectation itself can have a great effect on the Ethereum price.
Conclusion
The Shanghai update includes an important feature for Ethereum stakers or those considering staking — Stakeholders. This update implements a full-fledged Ethereum project PoS consensus, where users can finally withdraw both the staked coins and the rewards they have earned.
How exactly this update will affect the price of ETH at the moment remains unclear, we can assume that everything will depend on the general market trends at the time of the fork. In a bullish scenario, the market might absorb all the supply that will be sent to the exchanges and may not notice it at all. On the bearish market a new supply may lead to turbulence in the market and reduce prices.
Everyone who trades or invests in this project should be aware of the upcoming update and take it into account, as it is fundamental and opens a new page in the history of Ethereum. What do you think about the Shanghai update? Share your thoughts in the comments below!
If you want to learn more interesting facts about crypto then check out our blog! You might like our articles “Ethereum’s Shanghai Upgrade” and “Triple Top Pattern Explained”.
