The upgrade of Ethereum Shanghai is coming soon, what new opportunities are there?

特邀专栏作者

2023-03-09 06:11

This article is about 2316 words, reading the full article takes about 4 minutes

The Ethereum Shanghai upgrade is named after a technologically upgraded version of Ethereum in development and update, and the Shanghai upgrade will have an important impact on the Ethereum ecosystem.

What is the Ethereum Shanghai upgrade?

The so-called Ethereum Shanghai upgrade (EIP-4895) is named after a technical upgrade version of Ethereum in development and update. For background on Ethereum blockchain upgrades, since its launch in 2015, the Ethereum blockchain has implemented the following major upgrades: Byzantium (2017), Constantinople (2019), St Petersburg (2019), Istanbul (2019), Berlin (2021) and London Upgrade (2021).

As we all know, in September 2022, Ethereum successfully completed the conversion to the proof-of-stake (PoS) consensus mechanism. Prior to this, Ethereum used proof-of-work (PoW) and mining mechanisms to process and verify transactions. After converting to a proof-of-stake (PoS) consensus mechanism, it is no longer necessary to use specialized mining equipment to solve computing problems, but users To become a verification node of Ethereum, you need to pledge 32 ether coins (ETH). Since Merge combines the Ethereum mainnet with the PoS Beacon Chain, in the current technical mechanism of Ethereum, users cannot withdraw the pledged Ethereum (ETH) or related token rewards at any time.

The focus of this Ethereum Shanghai upgrade is to solve this problem. After the upgrade, it can technically allow pledgers to withdraw the pledged Ethereum (ETH) or related token rewards. Second, Shanghai Upgrade is committed to reducing the gas fee for Layer-2 solutions built on top of the Ethereum network, such as Polygon and Optimism. These Layer-2 solutions have somewhat optimized Ethereum for transaction speed and cost-effectiveness, but this upgrade will further reduce gas fees for transactions made on the Ethereum network. Also, Ethereum is currently the largest blockchain network supporting smart contracts, and the Shanghai upgrade will maintain ETH's leading position in this area by introducing EOF (EVM Object Format). This is another important impact that the Shanghai upgrade will bring to the Ethereum ecosystem.

In October 2022, in preparation for the Ethereum Shanghai upgrade,Ethereum developers launched a test network code-named "Shandong" (Shandong) to find bugs and potential problems. In December, Ethereum developers tentatively scheduled to implement the Shanghai upgrade on the Ethereum mainnet in March 2023. On January 5, 2023, Ethereum developers agreed to launch the upgrade in March 2023, implementing it as a network hard fork. Users will be able to test the update through a public test network implemented in Shanghai at the end of February 2023.

Impact on the market

Since the Ethereum Shanghai upgrade is the first major upgrade of Ethereum since the completion of the merger last year, this event has attracted much attention in the encryption field because it may have an important impact on the price of ETH. Year-to-date, according to ChainDD statistics, the price of ETH has risen from around $1,200 to around $1,600, an increase of about 33%.

However, many investors are worried that the upgrade of Ethereum Shanghai may also cause a large number of users to withdraw the Ethereum pledged on the Ethereum beacon chain. Will it directly cause large-scale market fluctuations? The answer is unlikely. Because the Ethereum Shanghai upgrade includes withdrawal restrictions and a queuing mechanism.

Ethereum will implement a withdrawal limit mechanism for the Ethereum pledged on the Ethereum beacon chain. In each epoch, that is, approximately every 6.4 minutes, only 6 verification nodes can withdraw the pledged Ethereum. With a maximum of 1,350 validators withdrawing from staking every day, it is estimated that after the Shanghai upgrade, Ethereum will only allow about 43,200 ETH to be withdrawn per day. According to estimates, if all beacon chain stakers withdraw their staked ETH tokens, and the number of new stakers is zero, the process will take about 300 days. And according to the Ethereum Foundation, the rate limit for withdrawals will be adjusted based on the total amount of ETH staked.

In addition to the mechanism included in the upgrade itself, the major ETH 2.0 protocols provide a minimum APY of nearly 4.8% pledged and there is still a lot of room for upside. If some pledgers withdraw, more people are likely to flood into the pledge. In fact, according to Dune, only about 16% of the pledgers are in a state of profit since the start of the pledge, if calculated in US dollars, it can be inferred that most of the pledgers will not immediately take out the pledged assets for sale . Therefore, to sum up, there is a high probability that the smashing event that causes market shocks will not happen.

Investment Opportunities and Ways to Participate

What we are most concerned about is, what benefits will this upgrade of Ethereum Shanghai bring, and whether there are more opportunities to invest and make money?

First of all, as an investor, you need to understand the most likely positive narrative logic of the upgraded ETH market:

Shanghai has upgraded to support withdrawal of the ETH previously pledged by the pledger. At this time, the access channel for pledge will be opened at the same time, which will increase the willingness of users to pledge ETH. According to the current pledge rate of 15%, it is still very low, so it is expected that there will be more Great upside. Obviously, users’ willingness to deposit assets into the liquidity staking agreement will also increase, and more users will use more assets to inflow, which is good for the agreement itself. About 10% of the stable profit in the pledge service will be given to the corresponding Service providers, their expected earnings and staking APY will also continue to rise. In a stable and good operating state, the price of the tokens corresponding to the protocol itself will also continue to rise.

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1. Pledge

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2. Liquidity staking agreement circular pledge

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3. Token investment

epilogue

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