What is Ethereum Shapella Upgrade? Everything You Need To Know – NewsTo
What is Ethereum Shapella Upgrade? Everything You Need To Know

What is Ethereum Shapella Upgrade? Everything You Need To Know


The Ethereum Shapella upgrade has been officially executed, providing an opportunity for Ethereum validators to withdraw their staked Ether. 

The upgrade has been welcomed by the crypto community enthusiastically. 

Zhuling Chen, the CEO of blockchain service company RockX, has expressed his optimism about the development, saying that it would change the landscape for ether token holders.

The Shapella upgrade is the major update the Ethereum blockchain has witnessed in its recent history. 

If you are a cryptocurrency enthusiast, this development must be something that can trigger your curiosity.

Let’s try to comprehend the development better!  

A Quick Overview: Ethereum Blockchain

Here we are trying to explore a development that has happened in the Ethereum blockchain. 

Better is to start the discussion from the point ‘what is Ethereum blockchain’, as it is always better to approach a concept from its bottom.

The Ethereum blockchain is a decentralised platform that runs applications and smart contracts, using Ether (ETH) as its cryptocurrency.

Shapella Upgrade: What You Don’t Know 

The Shapella upgrade is the talk of the town. 

In every discussion platform, this topic is being discussed aggressively and enthusiastically at this juncture.  

Why is this development considered crucial? Why, all of a sudden, has this become a hot topic of discussion? 

Of course, there must be a solid reason. 

Shapella upgrade, also known as the Shanghai Capella upgrade, marks a significant milestone in the Ethereum blockchain’s transition from Proof-Of-Work to Proof-Of-Stake mechanism after “The Merge”. 

The upgrade enables validators to withdraw stETH tokens on the Beacon chain, which currently holds over $18 million worth of ETH tokens staked since 2020. 

In addition to this, the upgrade includes vital changes in the execution and consensus layers along with enhancements to the Engine API. 

Shapella: What Validators Needs To Know 

Now, you know that the Ethereum blockchain has executed a crucial upgrade, which has the calibre to redefine the course of the platform and also can determine the future of the network.

This stage, the big question that requires clarity is the point of purpose. 

Generally speaking, the purpose of this update is to enable staking validators to withdraw their funds for the first time. 

At present, $34 billion or 18.14 million Ether is locked into the Beacon chain contract, which is the proof-of-stake chain that runs in parallel with the current proof-of-work chain. 

Post the update, validators would be able to withdraw their funds, subject to specific rules and thresholds built into the upgrade. 

The Impact Of The Update

The interesting point is that the update has the potential to impact both the execution and consensus layers of the network. 

The Shapella upgrade is a combination of the Shanghai upgrade and the Capella upgrade.  

The focus of the Shanghai upgrade is upgrading the network’s execution clients. Meanwhile, the focus of the Capella upgrade is upgrading the consensus clients. 

Execution clients are responsible for executing smart contracts and transactions, while consensus clients are responsible for validating transactions and creating new blocks.

The update is less likely to impact average Ethereum users.

Meanwhile, the development requires validators to upgrade their clients to ensure they can continue to participate in the proof-of-stake consensus mechanism. 

Understanding Proof-Of-Stake & Proof-Of-Work 

In this short discussion, a few complex concepts have been introduced to you. One such concept must be ‘Proof-Of-Stake’.

You don’t have to think too much to understand this concept. 

To explain this concept, let us help you understand how this network validates transitions and creates new blocks.

The network uses a proof-of-work consensus mechanism, which requires miners to solve complex mathematical problems to validate transactions and create new blocks.

However, the network is moving towards a proof-of-stake consensus mechanism, which relies on validators who lock up a certain amount of Ether to secure the network and validate transactions. 

The Future of Ethereum Post The Upgrade 

Maybe, you are curious to know what this upgrade says about the future of Ethereum.

The upgrade has been welcomed by the crypto community wholeheartedly. 

A total of $34 billion or 18.14 million ETH is currently locked in the Beacon chain contract, which is now eligible to be withdrawn.

This represents the first significant chunk of staked ETH supply to hit the open market. 

It’s likely that some portion of this will be sold. 

The impact of this upgrade on the price of ETH is likely to be minimal, as a significant portion of the staked ETH are expected to be re-staked. 

Ethereum has rallied 6.1 percent in the week leading into the upgrade, indicating the bullish sentiment in the market.  

How withdrawal of ETH works?

The most sensational question about this topic at this juncture is ‘how the withdrawal of ETH works’. 

Maybe, deep inside your mind, you also have the same doubt. 

Let us bring the spotlight of knowledge over the doubt.

Currently, there are more than 18.2M ETH deposited on the Beacon Chain, with an additional 1M ETH in accrued staking rewards since staking went live.

Validator exists undergo a full withdrawal process, while accrued rewards are eligible for partial withdrawals, which are expedited.

Full withdrawals have to go through two queues, withdrawal and exit, which serve as a delay before becoming fully liquid. 

Around 57,000 ETH are eligible to be withdrawn every day through full withdrawals at this juncture.

In the first 54 days post the upgrade, over 3.3 ETH can move to exit the Beacon Chain.

Meanwhile, partial withdrawals or staking rewards can become liquid near instantaneously and bypass the queues. 

However, it will take about 4.75 days post-Shapella for accrued staking rewards to be withdrawn. 

Inference 

If the price performance of Ether is any indication, the long-awaited upgrade turned out to be a non-event, as many had predicted. 

Within minutes after the upgrade, Ethereum saw only a 1 percent increase in price, with minimal fluctuations as it hovered around the $1,900 mark. 



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