1. Introduction
2. Understanding the Shanghai Upgrade
3. Withdrawing ETH
4. The Greener Future
5. The Future Ethereum Roadmap
6. Conclusion

INTRODUCTION

Ethereum merged with the Beacon chain on September 15th, 2022. This helped Ethereum transition from Proof of work consensus to Proof-of-stake consensus. This makes the ethereum ecosystem environment friendly and sustainable in the long run. The energy consumption by ethereum is reduced by approximately 99.95%.

Out of the many things that happened during the Ethereum merge in 2022, one thing that reduced the liquidity of Ethereum in the market was the mechanism of staking. One can stake the ether but cannot withdraw until the next upgrade. This upgrade was named the Shanghai (or Shapela) Upgrade.

Understanding the Shanghai upgrade

This represents the final step in Ethereum’s transition from PoW to PoS consensus. It enables the Ethereum stakers (or validators) to withdraw their deposits. 

The upgrade was initially called the Shanghai upgrade but the word ‘Shapella’ garnered attention in the later part. Shapella = Shanghai + Capella. This new term refers to the changes that are occurring at the network’s execution and consensus layer. Shanghai will create a new transaction type at the execution layer, allowing stakers to withdraw validator balances, while at the consensus layer, Capella will enable the Beacon chain to accept a withdrawal request. 

There was a lot of hype about the shapella upgrade since this will allow the stakers to withdraw their ETH and the earned rewards for the first time in 6 months. The amount of ether staked was very limited to the total number of ether in circulation. Though the LSDs did provide people with an opportunity to stake their ether and keep their token liquid, they still didn’t garnered as much attention. But now after the Shanghai upgrade, the LSDs are pretty hot.  

Shapella de-risked staking. This allows the users to unlock their coins at will. Now this means that the stakers funds are unlocked. They don’t have to wait for like 6 to 10 months to withdraw their ETH. The increasing demand for staking saw the ETH price surge to $2140 in four days after the upgrade, before plummeting down to $1850.

Withdrawing ETH

Just before the upgrade, there were around 19M ETH on the beacon chain including the rewards accrued. The withdrawal process is not as straightforward. In order to protect the ethereum blockchain, full withdrawals will have to go through two queues. Doing some validator maths we get that about 57,000 ETH will become eligible to be withdrawn immediately after the upgrade. In the first 54 days of the upgrade, around 3M ETH can exit the beacon chain.

Withdrawing the accrued rewards on the staked ETH can be withdrawn through partial withdrawals. Partial withdrawals get to bypass these queues and can be made liquid instanteneously.

The dilemma that ETH prices will be dumped after the upgrade goes live was indeed proved wrong. The Shanghai upgrade turned out to be a bullish unlock. ETH prices soar up high after the upgrade. This meant there was less selling pressure. Though the stakers were withdrawing they were not selling them into the market they probably were investing in some other projects. 

With this upgrade Ethereum ticked all the boxes to become more attractive. It is already the largest smart contract in the world and it already has the staking platforms even before the upgrade. LSDs tokens have been one of the best performing assets after the upgrade. Lido (LDO), Rocket Pool (RPL) and Frax (FXS) soared high after the upgrade. People are using the platform to stake the ETH and earn passive rewards, in the meanwhile they are also able to invest the liquid asset provided by the staking platform.

The Greener Future

The regulations being forced on the Ethereum blockchain regarding the energy consumptions have been answered with the merge. The future looks a lot greener. This is a great step towards a sustainable future. Now the next in order of business is increasing the efficiency of the protocol by addressing its speed and cost. 

With the greener blockchain ecosystem, the government will be more inclined towards a favourable policy. The Ethereum community understands the necessity of addressing the carbon emission generated by PoW. There is a recognition within the community of the need to offset or mitigate the environmental impact caused by Ethereum’s mining activities.

Carbon offsetting refers to the practice of compensating for CO2 emissions by supporting projects that reduce greenhouse gas emissions elsewhere. By participating in carbon offsetting, the Ethereum community aims to neutralise the carbon footprint associated with Ethereum’s POW consensus mechanism. The community aims to promote a more sustainable future by promoting carbon offsetting. 

The Future Ethereum Roadmap

Vitalik Buterin said, “Merge,Surge,Verge,Purge,Splurge” are the next big upgrades coming to Ethereum.

The Merge

The Merge is completed and Ethereum is now using PoS. This will roughly reduce the worldwide energy consumption by around 0.2%. The idea was to make the blockchain more sustainable, which has been achieved. The merge will also make Ethereum more scalable by introducing sharding.

The Surge

Now that environmental impact has been addressed, the community will now look to focus on scalability. This is to be achieved using sharding. Sharding involves breaking blockchain into multiple smaller pieces called “shards” and storing them in different places. This reduces the computational burden of Ethereum and allows the network to process large numbers of transactions faster.

The Verge

The storage of data will be optimised using the Verkle trees. They work the same as the merkel trees but are more size efficient which inturn reduces the node size. This will invite more validators to join in now that they don’t have to store an extensive amount of data to participate. 

The Purge

The aim is to remove excess historical data from the network. This reduces the hard drive requirement for the validators. The nodes will no longer be storing all the historical data instead the data which is an year old will not be stored. This will reduce the hardware requirement for the nodes and the bandwidth of the network will reduce.

The Splurge

After everything is put into action, there will be some requirement of time to time smaller upgrades and maintenance of the ecosystem. These upgrades are just to simplify the use of Ethereum and make it more accessible to the general public.

Conclusion

The future looks a lot greener, scalable and efficient. With the Merge being complete and all the upgrades in place, Ethereum can be up for some mass adoption. The increase in Ethereum transaction capabilities will be a major boost. The roadmap proposed by Vitalik looks very promising. If everything goes as planned, Ethereum will house some of the biggest projects impacting the world. It will be the global settlement layer for finance and different types of information.