The Shanghai Upgrade aka Shapella Upgrade has enabled withdrawals from Ethereum's PoS consensus mechanism.
Despite the unlock of 15,000,000 coins, Eth is riding high.
Vitalik Buterin announced that this upgrade initiates a new era in Eth development: scaling is coming next!
A Chinese proverb instructs us that, "A journey of a thousand miles begins with one step." On April 12th, at 22:27 UTC, Ethereum took a big step through Shanghai! Last week's Shanghai upgrade, also known as the Shapella upgrade, took about thirty minutes to finalize. It has been smooth sailing ever since. FYI, this upgrade was in fact two in one: the Shanghai and Capella upgrades were simultaneously implemented, hence the “shapella” portmanteau. This is a bullish outcome for Ethereum's team: the thousand-mile journey of Eth's development is solidly adhering to its roadmap.
Updated roadmap diagram! pic.twitter.com/MT9BKgYcJH— vitalik.eth (@VitalikButerin) November 4, 2022
The main purpose of this upgrade was to allow stakers to withdraw their funds from the protocol. As most crypto enthusiasts will recall, The Merge took Ethereum from Proof of Work to Proof of Stake (PoS) last year. This meant that stakers would support the blockchain’s consensus mechanism, not miners. Stakers get a nice passive Ethereum income for participating in the PoS process. Up until this upgrade, stakers were simply accruing rewards without any way to withdraw their rewards and/or stake.
There was some fear that the upgrade would lead to massive selling pressure on Ethereum, but this has not been the case. Over 15,000,000 Ethereum was locked into the protocol on the eve of Wednesday’s upgrade. Many stakers had joined the Eth 2.0 staking program in late 2020. It was theorized that these early stakers might want to liquidate their Eth or move it into things like NFTs–after all, the NFT market was in its infancy in late 2020. Despite these fears, Ethereum’s price has jumped from Wednesday's mid $1800 lows to comfortably over $2,000. Whether these prices are maintained or not, it is clear that the Shanghai upgrade is not responsible for significant price action.
Ethereum's price action with Wednesday in the crosshairs (from Trading View)
What’s more exciting than the Shapella upgrade itself is the Ethereum roadmap. During the official upgrade livestream, Vitalik Buterin said, "We're in a stage where the hardest and fastest parts of the Ethereum protocol's transition are basically over."
The biggest thing that remains for Ethereum–certainly in the mind of users–is scaling. Increasing the number of transactions per second on Ethereum will lead to much lower transaction costs. Vitalik said scaling was Eth’s next challenge to tackle, "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?"
This is encouraging news for people who believe in Ethereum’s future. “The Surge” aims to get Ethereum up to, and over, 100,000 TPS. This will make it a rival of Visa in terms of throughput. At that point, it seems likely that many institutions will seriously consider using Ethereum as their transaction layer given blockchain’s superior security vis-à-vis legacy centralized systems. The Verkle Trees that Vitalik mentioned are part of “The Verge.” This upgrade will allow for much more efficient data storage on Ethereum–an important upgrade for software developers and businesses.
All in all, the Shapella Upgrade is further confirmation that Ethereum is maintaining pole position in the crypto industry’s “Smart Contract Platform” subsector. Instead of merely competing with other cryptocurrencies, Ethereum has its sights set on global domination! Move over Visa, Vitalik and crew aim to challenge the global payment system and replace it with superior technology!