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Ethereum: Shapella Upgrade Goes Live – Here is What You Need to Know

Ethereum: Shapella Upgrade Goes Live – Here is What You Need to Know

The Shapella upgrades have finally arrived on Ethereum, providing significant new functionality to the blockchain network.

Shanghai (Shapella) is the first upgrade to Ethereum since The Merge transitioned the network to a PoS consensus algorithm from PoW, which reduced Ethereum’s energy consumption by 99.9% and new ETH issuance by over 90%.

Overview of the Shanghai upgrades on Ethereum

The upgrade was implemented by Ethereum Shanghai and Capella forks (hence “Shapella”), which upgraded the network’s execution and consensus layers, respectively, to support Beacon Chain withdrawals.

ETH stakers responsible for securing the Ethereum blockchain can now withdraw their crypto from the Beacon Chain for the first time, 28 months after staking first went live.

This marks a major milestone in Ethereum’s transition to the Proof-of-Stake consensus algorithm, which requires participants in the network to deposit the blockchain’s native cryptocurrency rather than relying on energy contributions from node operators.

Ethereum staking and Beacon Chain withdrawals

Individuals who directly deposited a minimum of 32 ETH (equivalent to roughly $61,000 as of the time of writing) with Ethereum can now withdraw their profits or their entire deposit. However, the withdrawal process is expected to take several days due to the high demand and limited block space.

On the other hand, stakers who used intermediary staking pools or centralized crypto exchanges to deposit their ETH will have to wait longer to withdraw their funds.

READ MORE: Bitcoin’s 80% Surge in 2023: A Positive Omen for its Future?

Lido has announced that customers will have access to their staked ETH withdrawal capabilities in about a month, while Coinbase customers may have to wait for several months before they can access their staked ETH. Each ETH staking service provider will implement their own timeframe for rolling out withdrawals.

Debate over the Shapella upgrades and their implications

However, the implications of the Shapella upgrades were fiercely debated by the crypto community leading up to April 12. Some analysts fear that the upgrade could lead to a flood of ETH getting dumped on the open market, causing short-term price volatility.

Others believe that enabling validators to withdraw at any time will lead to greater rates of staking participation, ultimately strengthening confidence in staking ETH to generate yield.

Despite these concerns, many experts predict that Ethereum staking participation will increase post-Shapella, particularly among institutional investors who were previously hesitant due to uncertainty around ETH staking withdrawals.

Mike Silagadze, the CEO of Ether.fi, a liquid staking platform, expects a steady influx of newly staked ETH in the coming weeks that far outstrips withdrawals. Similarly, Chen Zhuling, Founder and CEO of RockX, a Proof of Stake node collective, believes that the Shapella upgrade represents a game-changing development that positions Ethereum for sustained growth and success.

Staking participation

In terms of the logistics of the upgrade, Ethereum’s developers placed a limit on the number of validators that can withdraw each day, equating to 57,600 ETH or less than 0.05% of Ethereum’s supply, according to Glassnode.

READ MORE: The State of Crypto: Liquidity, Short Positions, and Regulatory Concerns

Ethereum is currently the largest Proof of Stake network by staked capitalization with $35.8B, despite the figure only representing 15.6% of ETH’s supply, according to Staking Rewards.

Nonetheless, many experts predict that the Shapella upgrades will ultimately result in greater rates of staking participation as validators feel more confident about their ability to withdraw their staked ETH at any time.

Currently ETH is trading at $1,915 with no significant price swings and has a 24-hour volume of $11.3 billion.

Alexander Stefanov

Reporter at CoinsPress

Alex is an experienced finance journalist and a cryptocurrency and blockchain enthusiast. With over five years of experience covering the industry, he deeply understands the complex and constantly evolving world of digital assets. His insightful and thought-provoking articles provide readers with a clear picture of the latest developments and trends in the market. His passionate approach allows him to break down complex ideas into accessible and insightful content. Follow up on his content to be up to date with the most important trends and topics - stay ahead of the curve with CoinsPress.

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