The long-awaited Shanghai-Capella update, also known as the Shapella Upgrade for Ethereum was triggered at 22:27 UTC on Wednesday, allowing the first-ever withdrawals of staked ether (ETH), valued at over $34 billion, and ushering in an exciting new phase for the blockchain network.
The update comes seven months after The Merge was activated by Ethereum’s core developers, starting the network’s move away from proof of work. The upgrade’s main focus is to reduce the network’s energy consumption, with the side effect of modifying its tokenomics.
Since The Merge, Ethereum’s environmental impact has drastically decreased. At the same time, it has experienced much-reduced emissions rates, resulting in a net drop in circulating supply due to a transaction fee-burning mechanism.
Also included with the upgrade are five Ethereum Improvement Proposals (EIPs), which are part of the recently activated Ethereum Shanghai Fork. The most eagerly awaited update in this new version of the Ethereum network is EIP-4895, which enables validators and stakers to withdraw the ETH they have staked on the Beacon Chain since 2020.
Some things still need to be addressed
The co-founder of the Ethereum blockchain, Vitalik Buterin, stated during the live stream that we are essentially at the end of the hardest and fastest stages of the Ethereum protocol’s transformation. He insisted:
“Very significant things still need to be done, but those very significant things can be safely done at a slower pace.”
Scaling—making transactions quicker and less expensive—will be the next issue the blockchain addresses after Shanghai, according to one of the important issues that Buterin stated will be handled after this Shanghai.
Since it is now successful, direct ether withdrawals are now possible, and all major platforms, from decentralized protocols like Lido Finance to exchanges like Coinbase, will have incorporated withdrawal capabilities within a few weeks. Once this is achieved, the network will have completed its shift to proof of stake.
Hi Shapella 👋
Withdrawals have appeared! pic.twitter.com/POqeZwkZJ4
— Etherscan (@etherscan) April 12, 2023
The market reacts to the Shapella upgrade
The Bitcoin (BTC) price was just below $30,000 in the hours leading up to and following the Shanghai-Capella upgrade. After a few hours, however, it rallied beyond the $30k level after surging by just about 1% over the last 24 hours.
Similarly, the long-awaited update has generated a nice rise in Ethereum’s value. The price of ether (ETH) is at $1,991 at the time of publication, up 6.22% over the previous 24 hours and strongly approaching $2,000 for the first time since August 2022.
Still, while the market is showing optimistic signs about the potential of the Shapella upgrade, it is currently unclear what long-term influence it will have on the price of ETH and the cryptocurrency market in general.