Ethereum enthusiasts are eagerly anticipating the blockchain’s Shanghai upgrade, which will allow for the first-ever withdrawals of staked ether (ETH) and complete the network’s historic transition to a fully functional proof-of-stake network. The upgrade, also known as Shapella, is set to take place at around 6:30 p.m. ET (22:30 UTC). Ethereum developers have run through three different testnet upgrades, and all worked smoothly. Although there were some minor hiccups in the last trial run, developers assured CoinDesk there wouldn’t be similar issues on the day of the upgrade. The Ethereum Foundation doubled its “bug bounty” program awards to $500,000 ahead of Shanghai to encourage individuals to report any vulnerabilities they could find.
When the Shanghai hard fork goes live, stakers will finally be able to put in requests for ether withdrawals. Ethereum developers say they’re feeling confident the upgrade will go smoothly. Developers have urged node operators to make sure they are running the latest version of their software clients to ensure that stakers can access withdrawals. Crypto market analysts have weighed in on how ether might trade as Shanghai goes live. According to a report from Coinbase, the performance of ETH will more likely have to do with the risk environment than any idiosyncrasies associated with the upgrade. The Coinbase report says that “if the trading environment sees risk assets selling off, people may decide to unstake and sell ETH just to de-risk, while institutions may not step in as aggressively on the buy side.”
However, there are some technicalities that can limit the amount of ETH that can be unstaked at once. The first factor is that only 44% of nodes have changed their withdrawal credentials to 0x01 address, which is needed to unstake partial or full withdrawals. Another factor that will affect the price of ether is that only 16 partial withdrawal requests can be put into a single slot (which happens every 12 seconds). And the final factor that will limit the price of unstaked ether is due to staking services’ timelines. Lido, which holds about 23% of all staked ether, will release withdrawals after the protocol goes through an upgrade in May. So in other words, selling pressure will be distributed over several days, given these technical mechanisms that prevent a price drop from happening immediately.
Other crypto analysts suggest the Shanghai upgrade will have limited if any impact on the market for ether. “My suspicion is that this is going to be a non-event in terms of price,” Brian Mosoff, CEO of technology company Ether Capital, told CoinDesk TV this week. He says that in the longer term, the successful implementation of a full, two-way staking system could attract big institutional investors, even if some early stakers move to cash out.
The Ethereum Cat Herders will be hosting a mainnet watch party starting at 5:45 p.m. ET. The event will be live-streamed and feature several prominent speakers from the Ethereum community. The Shanghai upgrade is a significant milestone for the Ethereum network and marks the culmination of years of development and testing. With the successful completion of the upgrade, Ethereum will be better positioned to compete with other blockchain networks and attract new users and developers.