Image source @ Visual ChinaAt 23:00 Beijing time on February 7th, the Ethereum Zhejiang testing network successfully activated the Shanghai upgrade on epoch1350, taking 13 minutes to complete, and successfully simulated the withdrawal of pledged ETH for the first time. (Note: The term 'Shapella' originates from Shanghai and Capella and represents improvements in two plans, which can simplify the process of simultaneously extracting rights pledge ETH at the execution layer and Beacon chain
Image source @ Visual China
At 23:00 Beijing time on February 7th, the Ethereum Zhejiang testing network successfully activated the Shanghai upgrade on epoch1350, taking 13 minutes to complete, and successfully simulated the withdrawal of pledged ETH for the first time. (Note: The term 'Shapella' originates from Shanghai and Capella and represents improvements in two plans, which can simplify the process of simultaneously extracting rights pledge ETH at the execution layer and Beacon chain.)
The next top priority is the eagerly anticipated upgrade of Ethereum Shanghai in March. At that time, the Ethereum Shanghai upgrade will allow verifiers to withdraw 16 million collateral ETHs. The Shanghai upgrade, as the first upgrade of Ethereum since its merger in September last year, officially marks the transition from blockchain to Proof of Rights (PoS) networks. Under the Pos network, Ethereum is deposited or pledged on the blockchain as a mechanism to help ensure transaction security. But before the upgrade in Shanghai, this type of pledge was one-way and users could not withdraw it after completing the pledge.
In addition, as a top priority in the encryption field at the beginning of 2023, Shanghai's upgrade may attract more people to join the network for pledge, but it may also cause selling pressure due to the withdrawal of pledged tokens, resulting in a short-term decline in Ethereum prices, which remains to be seen. However, as of now, the number of validators is increasing day by day.
Ethereum's Long Upgrade Road
In June 2021, the Ethereum network took a step towards deflation by completing the upgrade of EIP-1559 (Ethereum Improvement Proposal 1559). This upgrade to ETH blockchain introduces fees for each transaction, effectively reducing the supply of circulating cryptocurrency and addressing excessive transfer demand.
However, this is not enough to make Ethereum a deflationary asset, as even if some of it is destroyed, more currency continues to enter circulation.
On September 15, 2022, the arrival of The Merge became a turning point. This merger transformed the consensus mechanism of Ethereum from proof-of-work to PoS, thus improving efficiency and reducing the demand for block mining. This leads to a slower growth rate in ETH supply, which may lead to deflation in the long run. According to data from the UltraSoundMoney website, since the beginning of this year, Ethereum has destroyed more tokens than it has issued. As of the time of publication, Ethereum's growth rate in the past month was -0.15%.
One month after the merger, the JavaScript team of the Ethereum Foundation announced on October 16th the launch of Shanghai upgrade testing. Shandong Test Network is a fully JavaScript based test network operated by the JavaScript team of the Ethereum Foundation and DevOps of the Ethereum Foundation. The Shandong testing network has activated a possible set of Shanghai upgraded EIPs (including EIP-4895 that activates beacon chain withdrawal function) for early client testing.
However, just over a month later, this testing network was abandoned. On December 9th, the EFJavaScript team stated that due to the inclusion of some EIPs around EVMOjectFormat (EOF) in the Shanghai version of the upgrade, Ethereum developers decided to abandon the Shanghai test network and plan to launch a new public test network for the Shanghai upgrade in mid December, which will later become the Zhejiang test network.
Finally, the Ethereum Zhejiang testing network was officially launched on the evening of February 1st, marking an important milestone in the upgrade of Ethereum Shanghai and the last major testing phase before the activation of the main network. Unlike the previous testing network, the Zhejiang testing network is open to the public, allowing anyone to access the testing ETH and launch their own validator on the network to test the Ethereum improvement proposal EIP-4895, which involves extracting pledged Ethereum. In addition, the testing network will provide valuable observations on large-scale fund transfer behavior for validators and Ethereum developers, and help them identify any potential issues before officially launching the Shanghai upgrade.
Next, Ethereum developers will shift to other public testing networks, including Sepolia and Goerli, and prepare for the Shanghai upgrade in March. On March 3rd, Tim Beiko2 of the Ethereum Foundation stated on social media that if everything goes according to plan, Goerli will be the last rehearsal before the Shanghai main website launches Capella at the end of March.
In addition, the deployment roadmap for the future testing network upgrade in Shanghai will be confirmed during the ACDC conference call held at 22:00 Beijing time on February 9th.
The "Shanghai Upgrade" Effect is Emerging
Due to the fact that the Ethereum Shanghai upgrade is the first major upgrade of Ethereum since its merger on September 15th last year, this event has received significant attention in the encryption field as it may have a significant impact on the price of ETH. From the beginning of the year to the present, according to statistics from LinkedIn, the ETH price has risen from around $1200 to around $1680, an increase of approximately 40.87%.
However, upgrading in Shanghai may also lead to a large number of users extracting the pledged Ethereum, which may have a short-term impact on the price of ETH.
At present, the expectation of upgrading to Shanghai has led to a surge in interest among validators on the Ethereum network. Data shows that in the past month, the number of validators has increased by 3.07%, resulting in a 76% increase in revenue. These have prompted more validators to join in.
At the same time, due to the management of billions of dollars in tokens pledged on the Ethereum network by many crypto exchanges and protocols, the upgrade in Shanghai has gained even more attention. Banking giant JPMorgan Chase recently stated that Coinbase may be one of the biggest beneficiaries of the Shanghai upgrade. Analysts at the bank predict that after the upgrade of Coinbase in Shanghai, its annual revenue may reach around $500 million.
Since the launch of Beacon Chain last year, there has been a wave of pledge, and the total value of 16.47 million Ethereum currently locked in is approximately $26 billion, which will be extracted after upgrading in Shanghai. And a large portion of these locked Ethereum is preserved in the liquidity pledge agreement.
Data shows that as of February 7th, the value of 11 Ethereum based liquidity pledge agreements exceeded $11 billion, with Lido, Coinbase, and RocketPool experiencing a 4-10% increase in the past month. Among the over 6.87 million Ethereum devices held by these 11 platforms, Lido holds over 73% of TVLs; CoinbaseWrappedEther holds 15.72% of TVL, with a value of approximately $1.76 billion.
In addition, RocketPool's TVL increased by 10.71% within 30 days, while FraxEther's TVL increased by 76.73% during the same period. The former locked approximately 387016 ETHs, while the latter locked a total of 87134 ETHs.
Note: As of February 7th, the above figure shows the top five mobile mortgage platforms in terms of Ethereum's pledge volume.
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[This article was originally published on LinkedIn and authorized to be published on the Titanium Media App. Author: Song Song]
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