Ethereum has completed its much-anticipated “Shanghai” upgrade, also known as “Shapella”. The update, which enabled validators to withdraw staked ETH for the first time, brought Ethereum significantly closer to the completion of its multi-year transition to a full proof-of-stake network. In a proof-of-stake system, users pledge coins to validate new data on the blockchain in return for rewards, a process called staking. Prior to the upgrade, it was not possible to withdraw staked ETH or redeem accrued rewards. Staked ETH currently accounts for about 15% of the total supply of Ether tokens, according to crypto data platform Dune Analytics, and are worth approximately $31 billion.
Ethereum is the blockchain underpinning the second-biggest cryptocurrency, ETH. The upgrade has been received positively so far, with ETH up 2.28% in the last 24 hours, defying expectations of a post-upgrade “wave of selling” that would depress its price. Speaking at a launch event streamed live on the Ethereum YouTube channel, Vitalik Buterin, the co-founder of the Ethereum blockchain, commented, “We’re in a stage where the hardest and fastest parts of the Ethereum protocol’s transition are basically over. Very significant things still need to be done, but those very significant things can be safely done at a slower pace.”
Buterin also spoke about what lies ahead on Ethereum’s roadmap, saying that scalability – improving the cost and energy efficiency of transactions – was the new priority. “If we don’t fix scaling before the next bull run, we know people are going to be stuck paying $500 transactions. If, on the other hand, we don’t have Verkle Trees before the next bull run, well, things might suck, but you know, it’s a much smaller problem than, you know, $500 transactions, right?” he added.
The upgrade marks Ethereum’s biggest upgrade since “The Merge”, which was implemented in early August. The Merge saw Ethereum transition from a proof-of-work to a proof-of-stake consensus mechanism, a move that was aimed at making the network more energy-efficient. The transition has been in the works for several years and has been highly anticipated by the Ethereum community.
Ethereum’s move to a proof-of-stake consensus mechanism has been seen as a significant step forward for the network. Proof-of-work systems, like the one used by Bitcoin, require miners to solve complex mathematical problems to validate transactions and create new blocks. This process is energy-intensive and has been criticized for its environmental impact. Proof-of-stake systems, on the other hand, require validators to hold a certain amount of cryptocurrency as collateral. Validators are then chosen to validate transactions based on the amount of cryptocurrency they hold. This process is seen as more energy-efficient and environmentally friendly than proof-of-work.
The move to proof-of-stake is also expected to make the Ethereum network more scalable. The current proof-of-work system has a limited transaction throughput, meaning that the network can only process a certain number of transactions per second. This has led to high transaction fees during periods of high network activity. The move to proof-of-stake is expected to increase the network’s transaction throughput, making it more scalable and able to handle more transactions per second.
Overall, the completion of the Shanghai upgrade marks a significant milestone for the Ethereum network. The move to proof-of-stake is expected to make the network more energy-efficient, environmentally friendly, and scalable. With the upgrade now complete, the Ethereum community can look forward to the network’s next phase of development, which will focus on improving scalability and making the network more accessible to users.
