The Ethereum Core Devs Team announced the March 2023 launch date for the Ethereum Network Shanghai permanent divergence at the Ethereum Core Devs Meeting #151 on December 8. The Ethereum network will completely transition to Proof of Stake (PoS) as a result of this Shanghai upgrade, and the centralized issues caused by The Merge will most likely be effectively resolved.
According to MEXC, related tokens have risen significantly as a result of the upgrade. As of January 16, Ethereum(ETH) has the highest 7-day increase of 20.44%, Lido(LDO) has the highest 7-day increase of 46.14%, ssv(SSV) has the highest 7-day increase of 34.61%, and Rocket(RPL) has the highest 7-day increase of 25.33%. In terms of trading volume, taking LDO as an example, total spot and futures trading volume increased by 11091% from January 2 to January 9.
Shanghai Upgrade will address three major Ethereum issues: fundamental changes to Ethereum in the blockchain's EVM functionalities, withdrawal of staked ETH, and reduction of Gas Fees on Layer2.
EIP 3540, also known as EOF, will be officially introduced by Shanghai Upgrade (EVM Object Format). The separation of code and data is the primary change in this EIP. This could be advantageous to the validators on the ETH network. Furthermore, EIP 3540 introduces a new smart contract component that aids in the optimization of processing and the resolution of complex functional modules such as account abstraction and control flow in EVM.
Shanghai Upgrade will also address the issue of withdrawing staked ETH from Beacon Chain. Users who previously staked ETH on Beacon Chain are currently unable to withdraw their ETH, which will be resolved through Shanghai Upgrade. Furthermore, Shanghai Upgrade will reduce Ethereum network Gas Fees by equalizing block size and adding the CALLDATA function.
The modernization and liberation of all that ETH may benefit liquid staking protocols. Because of the staking entry barrier, Ethereum only has a staking ratio of 14%, which is significantly lower than other Layer1 blockchains such as Cardano, BNB Chain, and Solana. However, the update gives investors more options, allowing them to stake their ETH and earn rewards elsewhere. As a result, liquid staking protocols like Lido, Rocket Pool, Stakewise, Frax Finance, and Ankr Protocol have seen rapid growth. Among them, Lido has become the world's largest DeFi protocol, with a total value of $6.9 billion.
Furthermore, the upgrade will simplify the process of processing ETH transactions via Layer2 solutions like Arbitrum and Optimism, allowing ETH to gain more mainstream adoption and application scenarios. Layer-2 solutions on Ethereum, according to Vitalik Buterin, are already indispensable parts of the Ethereum blockchain and play critical roles in maintaining the network's affordability and cost-effectiveness.
Overall, the Shanghai Upgrade is critical to the future of Ethereum and the ETH price. Previously, when EIP-1559 was upgraded in August 2021, fueled by ETH, the entire cryptocurrency industry bottomed out and recovered significantly. Bitcoin reaches a high of 63,300 USDT, while Ethereum reaches a high of 4,865 USDT. The ETH staking rate is expected to rise further following the Shanghai upgrade. This may not only lead to an increase in the price of ETH, but it may also boost market confidence. Investors will be very optimistic that ETH will soon break through its current price now that the fully defined ETH roadmap has been released and more ETH has been staked.
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