Ethereum completes successful Shanghai upgrade, Validators can now withdraw staked ETH

On April 12, 2023, at 10:27 p.m. UTC, the Shanghai upgrade (Shapella) was successfully implemented at epoch 194.048, as scheduled. The Shanghai hard fork is a significant milestone that will bring many changes to the Ethereum network. The upgrade allows validators to withdraw staked funds for the first time.

The “Shapella” upgrade is the next in the pre-determined roadmap after The Merge. One of the important proposals in this upgrade is EIP-4895, which unlocks a massive amount of staked ETH to serve Ethereum 2.0 under The Merge.

As the blockchain transitions from the Proof-of-Work (PoW) consensus mechanism to Proof-of-Stake (PoS), transactions are verified by users who have staked ETH to accumulate rewards. Ethereum opened staking contracts to serve ETH 2.0 as early as December 2020, meaning that the staked amount has been locked up for almost three years. As of now, more than 18 million ETH, worth about 34.5 billion USD, according to the price of 1.1917 USD/ETH, are locked, which accounts for about 15% of the total ETH in circulation.

Therefore, the upcoming ETH price may be significantly affected if stakers decide to cash out after the three-year lock-up period. However, Glassnode estimates that only 170,000 ETH will be withdrawn from the Beacon Chain after Shanghai, and the impact of this will not be too severe. Among them, 100,000 ETH (equivalent to 190 million USD) will be sold by validators to cash out, and the remaining 70,000 ETH will be kept for liquidity. Even in the most extreme case of all ETH being dumped, the selling pressure will still be within Ethereum’s average weekly cash inflow, according to Glassnode.

Source: Glassnode

Data from Nansen also emphasizes that only about 4,000 people are waiting to withdraw 142,000 ETH (worth about 270 million USD) from staking. This number represents only slightly over 1% of the total number of validators and the amount of ETH staked. Moreover, all validators cannot withdraw their money at the same time due to daily withdrawal limits. “Currently, eight validators can exit their positions in each epoch, meaning 1,800 people can withdraw their staked ETH in full.”

For those who have directly staked 32 ETH as independent validators, they can only withdraw their rewards, i.e., profits generated from the staked ETH or request to withdraw their entire principal and interest from the blockchain. The second option may take a few days to complete. As for those who choose to stake through intermediaries, they will need to check the unlock ETH schedule on each platform.

According to the announcement, Lido will enable ETH withdrawals in mid-May – when the protocol has its own upgrade. Coinbase will start processing unstaking requests within about 24 hours after Shapella, while Rocket Pool has not yet announced the timing of unlocking ETH.

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