Ethereum’s Shanghai upgrade, also known as the Shapella update, is now live after being triggered at 22:27 UTC and finalized at around 22:42 UTC.
Validators can now withdraw the ETH they “staked” prior to the two-year-long lockup, which amounted to over 18 million ETH — worth roughly $34 billion.
Per Beaconcha.in, within half an hour after the upgrade went live, 285 withdrawals in epoch 194,408 had been processed, totaling 5,413 ETH worth around $10 million.
Despite concerns from investors about potential price drops due to the high number of withdrawal requests, the price of ETH did not change significantly and remained relatively stable.
“We’re in a stage where the hardest and fastest parts of the Ethereum protocol’s transition are basically over,” said Ethereum co-founder Vitalik Buterin.
This upgrade marks the completion of Ethereum’s transition to a proof-of-stake (PoS) network that kicked off with the Merge last year, leaving behind the proof-of-work (PoW) model, the mechanism Bitcoin uses.
The PoS mechanism offers several advantages over PoW, from reducing Ethereum’s energy consumption by almost 100 percent to providing a more secure network.
“Very significant things still need to be done, but those very significant things can be safely done at a slower pace,” Buterin said.
The next challenge that Ethereum aims to address is scaling, with the goal of making transactions faster and cheaper. The plan is to implement scaling solutions before the next bull run, so validators can “avoid getting stuck paying $500 transactions.”
Initially, the Shanghai upgrade planned to implement several other improvements to the blockchain.
These included proto-dank sharding, a streamlined data-sampling process that makes layer-2 transactions faster and more cost-effective, as well as EOF, a set of updates to the Ethereum Virtual Machine (EVM) that are essential for supporting smart contracts.
However, these updates were omitted to prioritize faster ETH withdrawals for optimization purposes.
Partial, full withdrawal options
With the Shanghai upgrade, validators can unstake their ETH through two main channels — partial and full withdrawals.
In a partial withdrawal, validators can withdraw their profits while leaving the originally staked Ether behind. To automate partial withdrawals, solo stakers that run their own validators are required to update their credentials to a 0x01 withdrawal credential.
However, it’s important to note that Ethereum’s current system can only process 16 partial withdrawal requests per 12 seconds. Thus, validators should be aware that with a high volume of withdrawal requests, the queue may take several hours to clear.
Meanwhile, full withdrawals involve redeeming both the rewards and the original staked ETH, allowing validators to fully unstake their entire 32 ETH.
However, unlike partial withdrawals, this process does not happen automatically. Validators must actively send a message to the blockchain expressing their intention to exit and then join a queue for processing.
Once their turn comes up in the queue, the full withdrawal can be completed. It’s important to note that upon fully withdrawing their ETH, validators will no longer participate in the process of validating blocks and contributing to the network’s security.
Gas fees improvement proposal
In addition to the staked ETH withdrawals, the Shanghai upgrade includes four Ethereum Improvement Proposals (EIPs) designed to improve gas fees for developers.
First, EIP-3651 focuses on improving gas fees by allowing access to the “COINBASE” address used by validators. This could result in better Maximal Extractable Value (MEV) payments for users, improving their overall experience on the Ethereum network.
The second, EIP-3855, introduces the “Push0” function, a code that will reduce gas fees for developers. Then, EIP-3860 aims to reduce gas fees for developers using the ‘initcode’ code.
Lastly, EIP-6049 is a proposal to inform developers about the depreciation of the “SELFDESTRUCT” code, which ultimately results in lower gas fees.