Moving on from the Merge upgrade of Ethereum that helped the network transition from its Proof of Work consensus to the more energy sensitive, Proof of Stake consensus, in September 2022; the next significant step in its development scale is the Shanghai upgrade. The upgrade which has been talked about very widely in recent times, has been planned to be executed in the second half of 2023. The Shanghai upgrade will implement a number of improvements on the Ethereum blockchain. The most anticipated feature that this upgrade will allow among others is the ability for Ether or ETH stakers to withdraw their staked coins as well as their accrued rewards.
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Participants have been working towards validating transactions on the Beacon Chain since December 2020. However, so far the staking feature has been a one-way functionality, where the funds were locked in the deposit contract while the Ethereum developers were building out the network in real time.
In short, the upcoming upgrade on the
Ethereum blockchain carries the ability to further improve the popularity of ETH staking. The Shanghai upgrade will drive competition between staking protocols which will result in benefit for the users, while also improving on the security of Ethereum’s new Proof of Stake chain.
Though the timing of the upgrade for Ethereum; during a
bear market; is being discusses by the community members as something to be looked into, experts are also saying that the Shanghai upgrade will rather increase the incentives for ETH liquidity providers. Below are the three main ways this is being worked upon:
Spurring Innovation: Firstly, the Shanghai upgrade will be introducing more innovative solutions in direct staking and liquid staking. Many experts are of the opinion that the heavy innovation in staking derivatives is most likely to also see more complex lending solutions that will provide people access to ETH staking. The option for users to redeem their wrapped staked ETH will end up pushing the liquid staking platforms to become even more user friendly.
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Strengthening ETH: Secondly, the upcoming upgrade will also help in strengthening Ethereum’s position as the blueprint for staking protocols. The upcoming and the existing staking protocols will have to compete with Ethereum’s yield mechanism, which is likely to make the asset class more secure, reliable and predictable.
Sovereign assets: Lastly, the Shanghai upgrade will be giving the ETH liquidity providers simplified yet powerful emotional security. How so? The guiding principle for crypto is sovereignty over one’s assets. When the Shanghai upgrade is executed, the emotional barrier to participate will also be lifted and liquidity providers will be able to more confidently commit to their staking.
The main goal for the end result after this upgrade is to create more of a decentralized ecosystem of contributors and a more secure network.
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Source: CoinDesk
