Ethereum

<p>Ethereum&#39;s Shanghai upgrade is due today, April 12, 2023. This is the blockchain’s first major update since the Ethereum Merge in September 2022. Fondly referred to as ‘Shapella’ - a combination of Shanghai and Capella, this change consists of two key upgrades and will finally allow validators to withdraw their staked Ether from Ethereum’s Beacon chain.</p><p>Ether is the second most valuable cryptocurrency after Bitcoin, and Ethereum is by far the most popular layer 1 blockchain for decentralized applications (dApps) and smart contracts. However, scalability issues have always plagued Ethereum. The Merge last year and Shapella this year, are both solutions to this issue.</p><h2 id="header-0">The Ethereum Merge</h2><p>Ethereum’s transition from a proof of work consensus to a proof of stake mechanism last year was a major step towards becoming more scalable, accessible and eco-friendly. The Merge involved merging its new Beacon Chain with Ethereum’s old mainnet. With this move, users were able to stake ETH to help secure the network and validate transactions.</p><p>However, that staked ETH could not be withdrawn by validators, and the subsequent staking rewards could not be disseminated among users. That’s what tomorrow’s Shapella upgrade deals with. But what is Shanghai exactly, and what is Capella?</p><h2 id="header-1">Shanghai vs Capella: What’s the difference?</h2><p>Ethereum’s Shanghai update is the upgrade to the execution layer of the Beacon Chain. This is where smart contracts and network rules reside.</p><p>Ethereum’s Capella update is the upgrade to the consensus layer. This ensures that devices contributing to the network are acting in accordance with the chain’s rules.</p><h2 id="header-2">Will unstaking impact Ether’s price?</h2><p>There has been much speculation around how this key change to <a href="https://cryptology.com/es/trading/ETH_USD" rel="noopener noreferrer nofollow">Ethereum will affect the price of Ether</a>. The Shapella upgrade effectively unlocks 18,000,000 staked ETH, which has the value of approximately $32 billion. With all this value soon to be available for withdrawal, will this create significant enough sell pressure to impact the price of ETH?</p><p>Potentially in the short term, yes. But it’s important to remember that not all staked Ether will be available for immediate withdrawal. After Shapella, the entirety of that 18,000,000 ETH won’t be free to be unstaked straight away. There will be a max withdrawal limit of approximately 50,400 ETH per day.</p><p>In addition, liquid staking derivatives (LSDs) such as Lido, have provided the ability to unstake ETH for years now. LSDs mean validators can stake their Ether and receive representative tokens such as stETH. These trade at a 1:1 price ratio with ETH and create more liquidity in the crypto market.</p><p>With this in mind, it’s fair to assume that there might be some negative price action as a consequence of Shapella, but in the long term any impact on ETH’s value from the Capella and <a href="https://blog.cryptology.com/everything-you-need-to-know-about-the-shanghai-update-ethereum/" rel="noopener noreferrer nofollow">Shanghai upgrade</a> will be minimal.</p>

What is Ethereum’s Shapella upgrade and how could it impact ETH's price?

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Cryptology

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