Ethereum’s Shanghai Upgrade Delayed by Two Weeks, Capella Upgrade to Enable ETH Withdrawals
The eagerly-awaited Shanghai upgrade has been delayed by around two weeks as per the announcement made at the Ethereum developer meeting on March 2. Originally planned to be released by the end of March, the upgrade is now expected to go live in the first half of April. The Goerli testnet, which will act as the last practice before the Shanghai upgrade is deployed on the mainnet, is set to take place on March 14.
Tim Beiko, the project coordinator and core developer for Ethereum, stated that the Shanghai upgrade is expected to take place approximately two weeks following the Goerli testnet launch. Beiko noted that a mainnet date will likely be established during the upcoming developers meeting on March 16, provided that Goerli proceeds smoothly.
If the launch of Shanghai on Goerli goes over smoothly, Ethereum stakeholders can expect a mainnet launch of the upgrade during the 2nd week of April.
— Christine Kim (@christine_dkim) March 2, 2023
What is Ethereum Shanghai Capella upgrade?
The Ethereum Shanghai Capella upgrade, also known as Shapella, is an upgrade to the network that aims to enable withdrawals of Ether (ETH) from the deposit contract. It allows those who staked 32 ETH or more on the PoS-based Beacon Chain since its launch in December 2020 to withdraw their staked ETH, which was locked for an indefinite period. The Sepolia Shapella testnet has successfully completed the upgrade and processed an ETH withdrawal.
The imminent Shanghai Capella upgrade, which will be tested on the Goerli testnet, is the last phase for Ethereum clients and staking providers to ensure a seamless rollout on the mainnet. The eagerly awaited upgrade will allow Ethereum staked on the Beacon Chain to be withdrawn gradually in phases. The withdrawal process will be contingent on the number of validators exiting at any given time, and will involve a two-step procedure comprising an exit queue and a withdrawal period.
At present, the Beacon Chain has 17.1 million ETH staked, accounting for approximately 14% of the total supply and worth about $28 billion. The upcoming Shanghai upgrade has been seen as a positive development for liquid staking providers because the staked ETH is presently locked on the Beacon Chain since the Ethereum consensus layer’s launch in December 2020. Liquid staking platforms such as Lido provide more options and higher yield potential for staked ETH, which could result in more collateral being deposited in the months following the Shanghai upgrade.
The postponement of the Shanghai upgrade may provide Ethereum stakers and staking providers with additional time to get ready for the upgrade, which has been eagerly awaited. If successfully rolled out on the mainnet, the upgrade could have a considerable effect on the Ethereum network and the broader cryptocurrency market.
Shanghai Upgrade: Potential Impact on Ethereum’s Price and Validators
The upcoming Ethereum Shanghai upgrade may cause a short-term impact on ETH price due to the withdrawal of staked ETH, but may result in greater price stability in the medium to long term. The dynamic withdrawal queue limits the selling pressure, but the maximum outflow could be $95 million per day. The decrease in validators may cause some selling pressure, but it is expected to be relatively small and dissipate over time. The upgrade could be pivotal for liquid staking derivatives and lead to a more sustainable ecosystem with higher APY for remaining validators. Ultimately, it may reduce risk and increase ETH staking in the long term.