Ethereum has undergone several upgrades since its release. These have ranged from small changes to the network to fundamental shifts in how Ethereum operates. One such shift was the “Merge”, which turned Ethereum into a proof of stake blockchain. The Shanghai update follows this transition, solving some key issues users have faced since. So what is it and how are you going to be affected?
What is the Ethereum Shanghai Upgrade?
Before the Ethereum Merge in September 2022, the network used a proof of work consensus algorithm. For any transaction to be verified, powerful computers had to solve computational puzzles, which could be inefficient and time-consuming.
The Merge allowed users to achieve consensus through staking instead. To get started, all you must do is lock in 32 ETH. However, these tokens were locked in indefinitely, with no clarity on when they could be withdrawn. The Shanghai update finally brings hope to validators. This upgrade allows stakers to withdraw their assets.
When is the Shanghai Upgrade Scheduled to Happen?
The Shanghai upgrade is scheduled to happen on April 12th, 2023.
What to Expect From the New Ethereum Shanghai Upgrade?
Your expectation depends on how you are engaged with the Ethereum network. If you are a staker or validator, you now have a lot more of your funds available to you. Your ETH is no longer locked behind the staking smart contract. Instead, you can choose to transact with it, use it in other DeFi applications or even trade it for fiat money.
On the other hand, general users and traders may find it harder to know what to expect. If you participated in a liquid staking pool, you have always been free to deposit and withdraw your staked ETH. But after the Shanghai update, those that deposited more than 32 ETH directly with Ethereum can pull the funds out.
If several validators decide to withdraw their accrued deposits, there will be more ETH in circulation. It is possible that this will create selling pressure and bring down the price of ETH. As a trader, you may be able to take advantage of this to buy more ETH from the exchange of your choice.
How Will Ethereum Shanghai Upgrade Benefit the Network?
Validator Rewards
Ethereum validators finally have a chance to withdraw their accrued ETH, giving them high returns on their investment. While some may cash out, others can choose to use their funds in alternative ways within the ecosystem.
Boost The Ecosystem
As mentioned above, validators will have more funds available for investing. Some individuals may reinvest their ETH in DeFi applications that offer services like crypto borrowing and lending or liquidity mining. This creates more liquidity for the entire DeFi ecosystem, thus boosting the Ethereum economy.
Purchase Opportunities
The sale of some staked ETH is expected to cause a dip in the token’s price. This creates the perfect opportunity for traders and investors to increase their holdings of ETH. As the price declines, traders have the chance to buy more tokens for the same investment amount.
How Will the Ethereum Shanghai Upgrade Affect ETH Prices?
It is uncertain how the Shanghai upgrade will affect prices, as it depends on the choice made by the stakers. If many stakers choose to withdraw their funds and convert them to fiat, there will be high selling pressure in the market. This pressure can drive the ETH price down markedly.
However, if stakers choose to retain their staked funds or reinvest them in other avenues, the price drop may be much lesser. In either case, you can expect a slight dip in ETH’s price as stakers manage their holdings.
What Impact Will the Shanghai Upgrade Have on Ethereum Staking?
It is possible that the amount of staked funds declines in the short run. This is because many stakers and validators may wish to reap the rewards of their investments. However, it is expected that the Shanghai upgrade will increase the total stake in the long run.
Before this upgrade, anyone who deposited their ETH was unsure of when they could withdraw it again. Now, all users will be allowed to withdraw their tokens at their convenience. This may give potential investors more confidence in depositing their tokens.
Closing Thoughts
The Shanghai upgrade follows in a long line of Ethereum changes and updates. It finally resolves the staking situation for users who deposited directly into Ethereum staking contracts. It also brings several advantages for both validators and traders. While ETH prices may dip in the short run, this move is a net positive for the Ethereum ecosystem as a whole.
FAQs on Ethereum Shanghai Upgrade
How will Shanghai Upgrade impact the price of Ethereum?
It is yet to be seen how the upgrade will have an impact on Ethereum’s price. If most stakers withdraw their assets, the price can go down. Conversely, if most of them continue to hold their staked assets the price can remain the same or move marginally upwards.
Is there anything you need to do as part of the Shanghai upgrade?
Customers of ZebPay don’t need to do anything during the Shanghai upgrade. Your assets are safe and will not be affected in anyway due to this upgrade. Kindly note that ZebPay does not provide any staking services. Please be aware of scammers who attempting to use ZebPay’s name to promote any such services.
