Ethereum, the second-largest cryptocurrency by market capitalization, is set to receive a major update in April 2023 called Shanghai.
This will be the first significant set of changes to the blockchain since “The Merge” update was introduced in September 2022.
Investors are eagerly awaiting the new functionality that the update will bring, while also speculating on its potential impact on the price of the network’s native cryptocurrency, ether.
What is The Shanghai Update?
The Shanghai update will focus on the functionality of withdrawing ethers currently deposited on the network, with changes to the execution layer of the blockchain.
This layer interacts directly with users and will be executed alongside the Capella update, which will bring changes to the consensus layer. The Capella update is a level without interaction with the general public. The two updates together are being referred to as Shapella by enthusiasts most connected to the blockchain.
It will focus on the functionality of withdrawing ethers currently deposited on the network and will be executed in conjunction with Capella, which will bring changes to the consensus layer.
The set of changes, known as “Shapella” by the community has been tested on three different test networks: Zhejiang, Sepolia, and Goerli, to ensure that the codes that will bring new functionalities to the network are effective and that Ethereum can withstand this update.
To put it simply, the Shanghai hard fork upgrade aims to provide a significant modification to the platform by enabling users of the Ethereum cryptocurrency network to access their staked ether (ETH) funds. This will mark the first time that such a feature has been available on the platform.
Why The Update Is So Important
Ethereum’s blockchain is currently the largest in the market in terms of total value locked (TVL) by its users, with almost 58% of all TVL in the market.
The network has also become a base for various second-layer networks, which seek to increase scalability and transaction speed without losing all the security of the project. Therefore, each Ethereum update is closely monitored by the market.
Furthermore, the Shanghai update has been in the works since The Merge was planned, as the changes it will bring are directly linked to the new functioning of the network after the major update of 2022.
Staking is a central part of Ethereum, with validators depositing a certain amount of ether on the network to earn rewards in exchange for validating transactions. The Merge update introduced a new consensus mechanism on the network, shifting from proof of work (PoW) to proof of stake (PoS).
In addition, the Shanghai update is highly anticipated by the market, as it promises to bring new functionality to the network and potentially impact the price of ether.
The changes are scheduled for April 12, 2023, and investors will be closely watching to see how the market reacts to this significant update.