This update is essential for Ethereum. It will allow users to withdraw their ethers “locked” on the blockchain for years. BFM Crypto makes shares.
The year 2023 promises to be busy for the developers of Ethereum, the blockchain co-founded by Vitalik Buterin. Indeed, Ethereum will continue with a new update, called Shanghai. This update, due in March, is eagerly awaited by the community. We explain why.
• Origin of the Shanghai update
To understand what this new update is all about, we first need to go back to Ethereum’s last major update, which is called Merge. Blockchain succeeded in this update in September, moving from a so-called “proof-of-work” (PoW) to “proof-of-stake” (PoS) operation.
As a reminder, in PoW, tens of thousands of computers (“miners”) work to solve a mathematical problem and thus earn the right to add a new transaction (block) to the blockchain to secure the network. It is about one very energetic method since these computers consume a lot of electricity.
Conversely, with PoS, validators must each “deposit” (in the crypto-speak we speak of “stacker” from where “pin” test) in a shared pot of 32 ethers (at the current price of ether, 32 ethers equals 39,000 euros), to secure the network. By depositing ether, they receive a reward.
As of December 2020, it was now possible for validators to deposit ether on the Ethereum blockchain in order to facilitate the transition to The Merge. Today, Ethereum has more than 496,000 validators, who have staked more than 15.9 million ethers, allowing them an average return of 5%.
However, these “settled” ethers are now “locked” on the blockchain, meaning they cannot be recovered by their owners, the validators. This is when the Shanghai update gets interesting.
• What is this update about?
Specifically, the Shanghai update will allow users (validators) to be able to withdraw their “locked” ethers on the blockchain. To put it simply, 15.9 million ethers can be released, which is the equivalent of $20 billion at the current price of the cryptocurrency.
The Shanghai update was due in the first half of 2023, but so far no details have been given. In a video published on January 5, developers of the Ethereum blockchain were closer.
We learn in particular that a final internal test (testnet) will be deployed on the blockchain next month, so that this transition goes smoothly. Then the Shanghai update should happen in March. Despite these beautiful announcements, we remember this Union it was delayed by several months by the developers, who wanted to do more tests before the transition. So we are not immune to a move from Shanghai.
• What are the consequences for the price of Ether and other “stock” cryptos?
For many experts, the release of these millions of ethers could have an impact on the price of the cryptocurrency. Indeed, it is likely that validators who have had their ethers blocked since December 2020 would like to recover them. In December 2020, one Ether was worth about $600… compared to about $1,300 today.
“Some observers fear that significant selling pressure will cause ether prices to fall, but it should be noted that today’s price ($1,300) is significantly lower than the merger date ($1,600),” Cryptoast points out. .
Moreover, in recent days we have noticed an increase in the prices of some cryptocurrencies which operate in the so-called liquid staking system, connected to protocols such as Lido and Rocket Pool.
Indeed, these protocols allow users to bet without betting on the regular amount of 32 ethers on the blockchain to participate in the Ethereum developer. Over the past few days, the prices of the local token Lido (Lido) and Rocket Pool (RPL) have seen their prices rise and this trend may continue over the coming months.
• What next after Shanghai?
During their meeting on January 5th, the developers chose to postpone adding a feature calledEthereum virtual machine object format (EOF), which should change the way smart contracts are made on the blockchain. A deferred function, just like the one called “Proto-danksharding”. This is a feature that “basically aims to solve the congestion of the Ethereum network by changing the transaction structure of the blockchain,” explains Cryptoast.