Investors are growing anxious as the Ethereum Shanghai Upgrade launch nears because they are unaware of whether Ethereum will move positively or negatively due to the upgrade. On February 22, Nansen, an analytics platform based on the Ethereum blockchain, provided some important information that Ethereum investors should be aware of before the Shanghai upgrade starts.
1/ What you need to know before the Ethereum Shanghai upgrade:— Nansen 🧭 | ETHDenver (@nansen_ai) February 22, 2023
1️⃣ Total ETH deposited & the top stakers
2️⃣ Prices at ETH deposits
3️⃣ The selling pressure on ETH from unstakers
A brief 🧵⤵️ pic.twitter.com/kWuhnwiXa3
The price at the largest ETH deposits, the number of top stakers, and the selling pressure on ETH from unstakers following the Shanghai upgrade launch were among the critical details disclosed in a sequence of posts on Twitter.
Finding the “sufficient end state” for an operational, secure, and decentralized blockchain is the responsibility of the Ethereum development team. This entails offering services that are sufficiently secure for Ethereum protocol clients and users.
Even though Ethereum has made significant strides this year in terms of development and providing a safer ecosystem for users, the predictions suggest a challenging and protracted future with “urgent technological challenges” to address on the network.
What is the Ethereum Shanghai Upgrade?
The Ethereum Shanghai upgrade is a set of changes made to the Ethereum blockchain to improve its efficiency, security, and scalability. The upgrade is named after the city where the Ethereum Foundation’s Devcon5 conference was held in 2019. It is a significant milestone in the ongoing development of the Ethereum ecosystem.
One of the main features of the Ethereum Shanghai upgrade is the implementation of the Ethereum 2.0 upgrade. Ethereum 2.0 is an important upgrade that aims to address some of the platform’s scalability and security issues. The upgrade replaces the current proof-of-work (PoW) consensus algorithm with a proof-of-stake (PoS) consensus algorithm.
Proof-of-work is a consensus mechanism used by many blockchain platforms including Bitcoin and Ethereum. It requires miners to address complex mathematical problems to validate transactions and create new blocks. While PoW is secure, it is also energy-intensive and can be slow and expensive.
Proof-of-stake, on the other hand, requires validators to hold a certain amount of cryptocurrency as a stake to validate transactions and create new blocks. It is less energy-intensive than PoW and allows for faster and cheaper transactions. Ethereum’s move to PoS is expected to make the network more scalable and secure.
Another feature of the Ethereum Shanghai upgrade is the implementation of the EIP-1559 proposal. EIP-1559 is a significant change to Ethereum’s fee structure that aims to make transaction fees more predictable and reduce overall transaction fees. It introduces a base fee that is burned when a transaction is processed, reducing the overall supply of Ethereum and potentially making it a deflationary asset.
The upgrade also includes other changes aimed at improving the efficiency and security of the Ethereum network. For example, it introduces a new feature called “statelessness,” which allows Ethereum nodes to store fewer data and reduces the storage requirements for running a full node. It also includes changes to Ethereum’s smart contract language, Solidity, to make it more secure and easier to use.
The Ethereum Shanghai upgrade is being rolled out in multiple phases, with the first phase, Beacon Chain, launching in December 2020. The upgrade is anticipated to be finished by 2022-23, with the full implementation of Ethereum 2.0 and all its features.
Price Movement Of ETH Prior To The Shanghai Launch
After a small reversal from yesterday, ETH has risen 1.8% in a positive trend over the previous 24 hours. Together with other altcoins in the market, ETH has been on the rise since the start of the year.
Since late last year, when the price of bitcoin fluctuated between $1,100 and $1,600, it has increased dramatically by more than 40%, currently trading above $1,600. Yet, despite the steady climb, ETH is still 65% below its record high, which was $4,878 in November 2021.
Could ETH Prices Rise Once More?
When discussing how ETH’s price has changed, staking is a crucial topic. Our positive argument would be that if usage increases as a result of the Shanghai network upgrade, we can anticipate more users to HODL and stake their ETH. As a result, customers who were previously anxious about being unable to withdraw their ETH can now proceed to enjoy increased income without the drawback of decreased liquidity, which would increase Ethereum’s staking ratio.
In this sense, we can expect ETH’s price to increase as huge institutions purchase and stake their ETH to earn a good annual percentage yield (APY) of around 5% without sacrificing liquidity.
The impending Ethereum Shanghai upgrade resolves several annoying problems that have consistently troubled users and developers, from reduced gas fees to fewer rejected transactions. The Foundation ensures there will be few delays as they get ready to release the Surge upgrade by incorporating these changes before the significant EIP-4844: Proto Danksharding implementation.
All eyes will be on its implementation for many ETH investors and traders as the Ethereum core teamwork to complete the Ethereum Shanghai upgrade as smooth as possible. Although this network upgrade may not be as significant as The Merge, it does set the stage for further improvements. The Ethereum Shanghai upgrade will affect how institutional and retail investors use ETH by altering how staking functions. This is because, now that withdrawals from the Beacon Chain are possible, they will consider staking to be viable.