Ethereum’s Shapella upgrade is here and, among other things, validators will soon be able to make their much-awaited withdrawals if all goes to plan. Coined from merging two upgrades — Shanghai network upgrade and Capella consensus-layer upgrade — Shapella has been vetted for vulnerabilities and deemed safe for activation on the Ethereum network at epoch 194048.
Slated for April 12, validators who have staked more than 18 million Ether (ETH) since December 2020 will be able to make partial or full withdrawals of their tokens for the first time.
This is significant in several ways. They include that it will add another layer of progress to Ethereum’s complete transition to a Proof-of-Stake (PoS) consensus mechanism; and likely impact ETH price, the network’s native token, which first picked up steam above $1,500 in December 2020 when the staking started and climaxed at about $4,900 by the following November before settling at its current $1,800 range. It will also have other implications for the entire crypto ecosystem, like widening the gap between Ethereum and the current leading cryptocurrency, Bitcoin.
Ethereum’s Established Edge
Ethereum’s switch to PoS adds to the network’s established dominance in the decentralized finance (DeFi) space, as well as in concepts like non-fungible tokens (NFTs), and decentralized web (Web3), and for creating decentralized apps (dApps), and smart contracts.
Together, Ethereum’s competitive advantages over other blockchains help retain the user community’s confidence in the network. Its unrivaled record continues to inspire innovation across its ecosystem, including with investors and developers, to explore new use cases for the platform.
Post-Shapella ETH Price Impact
Several suggestions have since been made of what to expect after the monumental milestone, which is set to impact the Ethereum ecosystem and the wider crypto industry. While a rally saw ETH reach a nine-month high of about $1,900 in the week preceding the upgrade, analysts at K33 Research have made a bear case, post-fork. They think it could increase selling pressure as they expect approximately 1.3 million ETH — an estimated 1.1 million ETH earned as staking rewards from January 2021 and the 158,000 ETH held by Celsius — worth about $2.4 billion, to flood the market.
For RockX, a staking and blockchain infrastructure provider in Asia, the opposite could be the case. They argue that allowing withdrawals after Shapella could make ETH staking much more accessible to retail investors who were previously unwilling (but have now been influenced by the recent growth in the popularity of liquid staking platforms) to stake ETH for an undetermined amount of time.
Another Likely Effect of Shapella
It’s been argued that the upgrade would strengthen Ethereum’s increasing divergence from Bitcoin. The top cryptocurrency still relies on the energy-consuming Proof-of-Work (PoW) mechanism for mining to validate transactions on its network.
Though Bitcoin holds the largest share of the crypto market, a Bitcoin.com analysis suggests that Ethereum’s market dominance has been rising against Bitcoin’s. And considering that it can process more transactions and faster than Bitcoin, provides smart contract capabilities in addition to the concepts it powers, Ethereum is set for greater heights.
Bane of Ethereum’s Rise
The Shapella upgrade might bring about meaningful improvements to Ethereum, but its scalability trilemma remains problematic. While it is touted as the world’s leading blockchain network preferred by retail and enterprises, the scalability issue persists and competitors continue to lose sleep on Ethereum’s edge. New chains emerge every day, but none has attained the so-called ‘Ethereum Killer’ status yet. But once one does at some point, Ethereum’s glow is bound to fade. The other concern borders on ETH being considered a security alongside LUNA, UST, and KuCoin Earn, in a lawsuit filed against Kucoin recently in New York. From its 2015 initial coin offering (ICO) distribution to the PoS staking arrangement, the legal debate seems not to be going away. The ETH price dropped by about 7% after the lawsuit was announced. An eventual classification of ETH as a security could impact its offering by crypto exchanges, which could be a huge setback for Ethereum.
ProBit Global supports the Shapella upgrade on the Ethereum network. There will be a suspension of deposits and withdrawals for ETH, ARB, and ERC-20 tokens via the Ethereum and Arbitrum One networks on April 12, 2023, 22:10 UTC.