Ethereum’s Shanghai Upgrade is coming soon to boost the network’s efficiency, scalability, and security. Named after the bustling city of Shanghai, the upgrade will introduce new transaction types, improve the Ethereum Virtual Machine (EVM), and change the consensus algorithm. These changes will make the network faster, more secure, and capable of processing more transactions while reducing fees. The upgrade is part of a broader effort to improve the Ethereum network and is expected to have a significant impact on the blockchain ecosystem. We’ll disassemble it into the details in this article.

Explanation Of Why Shanghai’s Upgrade To Ethereum Is Important

The Shanghai upgrade, set to launch on April 12th, 2023, will bring several game-changing improvements to the blockchain ecosystem. One of the most eagerly-awaited changes is the ability for ETH stakers to remove their staked ETH and rewards, a feature that has long been sought by Ethereum users and the crypto community at large. This will be implemented in the EIP-4895 proposal and is expected to have a significant impact on the network’s functionality.

In addition to the staking change, the Shanghai upgrade includes several other proposals related to the Ethereum Virtual Machine (EVM) Object Format (EOF), which contains over 120 operation codes that enable decentralized programmability to the networks. While developers are working to implement these proposals, they have also stated that if they can’t be implemented in time, they will be postponed to avoid delaying the unstaking of ETH. Unfortunately, one proposal that won’t be present in the April 2023 release is EIP-4844, which introduces the highly-anticipated sharding upgrade for Ethereum due in 2024. This upgrade will significantly increase scalability by sharding data, enabling the platform to process more transactions per second.

The Difference between Shanghai and Capella Upgrades

The Shanghai and Capella upgrades are two different upgrades for Ethereum. Shanghai is an execution layer upgrade, while Capella is a consensus upgrade needed for staking withdrawals. However, the Ethereum community has started referring to the two upgrades together as the “Shapella” upgrade. This upgrade is highly anticipated because it will enable staked ETH withdrawals, allowing ETH staked on the consensus layer to be withdrawn to an Ethereum execution address for the first time.

This will lead to increased competition among staking providers and more innovation within the sector, lowering barriers to entry. The upgrade is expected to have several implications for stakers, the Ethereum staking ecosystem, and defi more broadly, including giving long-term stakers access to locked funds and inspiring confidence in liquid staking protocols.

Source: Dune Analytics

Why Is the Shanghai Upgrade Being Implemented Now?

The Shanghai Upgrade is being implemented to enable validators to withdraw their staked Ethereum (ETH) and accrued rewards. Ethereum transitioned from Proof of Work to Proof of Stake in September 2022, and validators have been staking ETH and earning rewards since then. However, their staked ETH was locked up until the next update to the chain, which is now being addressed by the Shanghai Upgrade.

How Will the Withdrawal Work in Detail?

With the implementation of the upgrade, validators can create a ‘withdrawal credential’ to retrieve their staking rewards or exit the Beacon Chain by withdrawing all their staked ETH. However, there will be a waiting period for validators to access the ETH they wish to unstake, as there is only one queue for both full and partial withdrawals on the blockchain. Only 16 partial withdrawals can be made in each slot, which occurs every 12 seconds.

Source: Dune Analytics

Summary

The Shanghai Upgrade will allow ETH stakers to remove their staked ETH and rewards, improves the EVM, and will change the consensus algorithm, making the network faster, more secure, and capable of processing more transactions while reducing fees. The upgrade is part of a broader effort to improve the Ethereum network and is expected to have a significant impact on the blockchain ecosystem.

Ready to swap to ETH? Look no further than DeCommas Swap — it’s fast, easy, and completely free! Don’t forget to join our Discord and follow us on Twitter to stay in the loop on this exciting upgrade.