The highly anticipated Shanghai upgrade of Ethereum’s blockchain is set to take place on April 12, and is being hailed as another watershed moment for crypto’s second-largest blockchain after Bitcoin. The Shanghai-Capella upgrade is expected to unlock over $30 billion in staked ETH on Ethereum’s beacon chain. This upgrade is a mix of the Shanghai and Capella upgrades, and is expected to enable the withdrawal of over 16 million ETH deposited in the chain’s staking contract since December 2020. This massive staked ETH fortune is worth nearly $30 billion at current prices.
Clients are advised to upgrade their nodes ahead of Shapella’s arrival, according to core developer Tim Beiko. The tokens also make up over 13% of ETH’s total token supply. Entities have locked a staggering amount of ETH since 2020 to secure their place as Ethereum validators – the people who help manage ETH’s network by authenticating transactions and securing the chain.
Validators became a crucial part of Ethereum after the Merge, effectively replacing miners who operate similar duties in a proof-of-work blockchain. The growing number of validators beyond 500,000 and stETH exceeding 16 million tokens could indicate increased interest in ETH. However, the coming unlock also raises concerns of sell pressure in the market. The concentration of stETH in the hands of a few entities might also pose centralization concerns.
Nansen data shows that services like Lido Finance, Coinbase, Kraken, and Binance are the top five staked ETH depositors. It’s unclear if selling pressure might increase after the unlock enables withdrawals for over 16 million stETH. ETH was up 1.30% and traded at $1860 on Monday.
The Shanghai upgrade is scheduled for epoch 194048 at around 11 pm UTC on April 12, barely two days away at press time. Ethereum’s beacon chain is a proof-of-stake blockchain that was launched in December 2020 as part of Ethereum 2.0. Proof-of-stake is an alternative to proof-of-work, which is used by Bitcoin and other cryptocurrencies. It’s designed to be more energy-efficient and scalable than proof-of-work.
The beacon chain is the backbone of Ethereum 2.0, and is responsible for coordinating the consensus of the network. Validators on the beacon chain are responsible for proposing and voting on new blocks, and are rewarded with ETH for doing so. The beacon chain is also where the Ethereum 2.0 deposit contract is located. This contract allows users to deposit ETH into the Ethereum 2.0 network in order to become validators.
In conclusion, the Shanghai-Capella upgrade of Ethereum’s blockchain is expected to unlock over $30 billion in staked ETH on Ethereum’s beacon chain. Clients are advised to upgrade their nodes ahead of Shapella’s arrival. The coming unlock also raises concerns of sell pressure in the market, and the concentration of stETH in the hands of a few entities might pose centralization concerns. However, the growing number of validators beyond 500,000 and stETH exceeding 16 million tokens could indicate increased interest in ETH.
