Join the Staking Revolution: Ethereum Shanghai Upgrade Makes it Easier and Safer Than Ever

Key Upgrades in the Evolution of Ethereum Blockchain: From Beacon Chain to Shanghai

1. The Ethereum blockchain is undergoing multiple upgrades, including the launch of the beacon chain, the merge with the original proof of work mainnet, and the upcoming sharding to improve scaling and capacity.
2. The Ethereum community uses a process called Ethereum Improvement Proposals (EIPs) to propose changes to the blockchain, and the upcoming Shanghai upgrade will include several EIPs, with a focus on EIP 3651.

The first was the launch of the beacon chain, the proof of stake blockchain that introduced staking. There was then the merge, which saw the original proof of work. Mainnet joins with the beacon chain to become a single chain. Finally, there is sharding, which aims to improve scaling and capacity for storing data when it ships in late 2023, or 2024. In between these, there are several additional upgrades and that’s where Shanghai comes in. The Etherium community uses a process called ethereum improvement proposals. To propose potential changes to ethereum an EIP must go through several stages of discussion, design and implementation by developers and the community before it can be chosen for inclusion in an upgrade. Shanghai, whose testnet is expected to go live in February before the main net launch in March will include for improvement proposals, which will now take a closer look at EIP 3651.

The Impact of Upgrades on Ethereum Staking: From Coinbase Changes to Shanghai and Beyond

1. Coinbase has changed its service from cold to warm storage, reducing the gas fees for direct Coinbase payments.
2. EIP 3855 introduces a new smart contract instruction to reduce the size of the contract and gas required for deployment, while EIP 895 will allow validators to withdraw staked Ethereum without incurring gas fees.
3. The Shanghai upgrade will attract more users to stake their Ethereum and become validators, as it will reduce the risk associated with staking.
4. Companies and entities holding Ethereum are expected to take advantage of staking to earn interest and grow their stack, leading to less Ethereum on the open market and a positive effect on price.
5. Following the Shanghai upgrade, the next upgrade, “Cancun Ethereum,” will focus on EIP 4844 (Proto Dank Sharding), which will greatly benefit Ethereum scaling by increasing transaction throughput and reducing high gas fees.

Coinbase changes the Coinbase from cold to warm, which significantly reduces the gas fees paid for direct Coinbase payments. This benefits block builders who ultimately pay less fees. EIP 3855 pushes zero instruction and adds a new smart contract instruction to push the constant value zero onto the stack. Not only does this reduce the size of the smart contract, but it also reduces the gas required for deployment, i.e. IP 3860 limit and Mita init code. The init code is executed during the contract deployment process and its size will now be limited to 49,152 bytes, which is double the code limit. The addition of gas fee metering will ensure that fees are fairly charged and also proportionate to the smart contract size. Finally, there’s the most significant EIP of them all. The 895 Beacon chain pushes withdrawals as operations. This enables validators to withdraw their staked ethereum and any rewards they have generated. In addition to that, they don’t incur any gas fee.

This doesn’t mean however, that when EIP 4895 is implemented, the validators will unstick and then proceed to sell their coins. That is pure FUD. In addition to earning passive income, part of the reason people stake Ethereum is because they believe in the long term future of the project. This is especially true of the current group of validators as they knowingly stake their coins with no ability to withdraw. Some went even further by staking their coins before the merge, when there wasn’t even any staking rewards.

For the Shanghai upgrade is that once the withdrawal functionality is implemented, we’re going to see a huge influx of users wanting to stake their ethereum and become validators. This is because Shanghai will have eliminated most of the risk associated with this activity. Companies, dowels and other entities which hold eth will likely begin to take advantage of staking to earn interest and grow their stack. All this means less ethereum on the open market. And that will ultimately have a positive effect on price. Just this week in anticipation of the Shanghai upgrade we’ve seen huge pumps on tokens associated with liquid staking protocols. These solutions of which major players include Lido finance and rocket pool allow users to enjoy the benefits of staking without putting up the required 32 eth to become a validator. You can give them any lesser amount, and they will stake it for you jointly with the funds of other customers. It basically works in a similar fashion to a mining pool.

Since January 1, the governance token of Lido finance has pumped by as much as 180%, while rocket pools rose about 50%, showing a great deal of confidence in these protocols in the lead up to Shanghai. So what comes next? Well, following Shanghai, the next upgrade will be called Cancun ethereum, developers will shift their focus towards EIP 4844, also known as proto dank sharding. This update is arguably of greater importance than Shanghai, as it will greatly benefit ethereum scaling 4844 will increase the transaction throughput and cut down on absurdly high gas fees while also laying the groundwork for full sharding later down the track.

Key Takeaways from the Ethereum Upgrades

1. Coinbase has changed its service to warm storage, reducing gas fees for direct Coinbase payments.
2. The Ethereum community uses Ethereum Improvement Proposals (EIPs) to propose changes to the blockchain.
3. The upcoming Shanghai upgrade will include several EIPs, including EIP 3855 to reduce the size of smart contracts and reduce deployment gas fees, and EIP 895 to allow validators to withdraw staked Ethereum without incurring gas fees.
4. The Shanghai upgrade will attract more users to stake their Ethereum and become validators, as it will reduce the risk associated with staking.
5. Companies and entities holding Ethereum are expected to take advantage of staking to earn interest and grow their stack, reducing the amount of Ethereum on the open market.
6. The “Cancun Ethereum” upgrade will focus on EIP 4844 (Proto Dank Sharding), which will improve Ethereum scaling by increasing transaction throughput and reducing high gas fees.
7. The growth of liquid staking protocols such as Lido Finance and Rocket Pool is expected in the lead-up to Shanghai, allowing users to enjoy the benefits of staking without putting up the required 32 Ethereum to become a validator.