Ethereum’s next major upgrade after the Merge, “Shanghai”on March 2023, will focus on facilitating the withdrawal of staked ETH, which could have a ripple effect on the supply and demand in the market.
The Merge brought Proof-of-Stake to Ethereum, which dramatically reduced its cost. Instead of relying on cryptocurrency miners, the network now rewards validators who stake or “lock up” their ether (ETH) with the network. The network’s upcoming upgrade, “Shanghai”, will take the benefits of proof-of-stake to the next level by lifting restrictions on staked ETH, and giving validators the freedom to access their earned rewards.
The current staked ETH can’t be “unstaked”, and it affects the interest of most people. Only more than 16 million ETH is staked, accounting for only 13.88% of the total supply, which is far lower than the average staking rate of 61% in PoS networks. In comparison, most Layer 1 networks have a staking rate of over 40%. Once the Shanghai upgrade is completed and the staked ETH is able to release, it is expected that more validators will participate in staking. If more people stake ETH after the Shanghai upgrade, it will have a huge impact on its liquidity staking protocol.
With the implementation of the Shanghai network improvement, some highlights of viewpoints include:
- The Shanghai upgrade not only helps to reduce transaction costs on the blockchain and accelerate transactions on Ethereum, but it will also simplify the process of processing ETH transactions on Layer2, helping tokens easier to enter the mainstream market.
- The crypto market may still be bearish. The Ethereum Foundation has set a hard limit of about 40,000 ETH that can be unlocked each day, in case there is potential pressure for plenty of ETH to be released to gain more liquidity.
- With adoption increases, more users could anticipate staking their ETH as adoption rises. The high staking rate of Ethereum could expect the movement of ETH price to rise on a large-scale
The upgrade has had a significant effect on related tokens. According to the data reported by MEXC: Over the past 30 days, Ethereum(ETH) has experienced a 16.60% surge in price, while Lido(LDO) has increased by 41.80%, Rocket(RPL) has increased by 82.75%, and SSV(SSV) has the highest increase at 155.47%. In terms of trading volume, from January 16 to February 15, the total spots and futures trading volume of LDO increased by 1950%.
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