Shanghai Upgrade Goes Live, Unlocks Over $34 Billion in ETH Staking

The Shanghai hard fork—Ethereum's most anticipated upgrade of 2023—has been successfully activated.

The Shanghai upgrade (also known as Shapella) was deployed at epoch 194,048 at 05:27 AM (Vietnam time) on April 13, 2023, as per the scheduled timeline.

The Shanghai hard fork marks a significant milestone for Ethereum, introducing major changes to the network. "Shapella" is the next upgrade in the roadmap following The Merge. One of the critical proposals in this upgrade is EIP-4895, which unlocks the vast amount of ETH staked for Ethereum 2.0 as part of The Merge.

Read More: What Stakers Need to Know About ETH Unlocking Post-Shanghai Upgrade

After Ethereum transitioned from a Proof-of-Work (PoW) to a Proof-of-Stake (PoS) consensus mechanism, transactions have been validated by users who staked ETH to earn rewards. Ethereum's staking contract for ETH 2.0 has been active since December 2020, meaning that this ETH has been locked for nearly three years.

Currently, the locked amount stands at over 18.1 million ETH, worth approximately $34.5 billion at an exchange rate of $1,191.7 per ETH. This represents about 15% of the total circulating ETH.

ETH Locked in the Ethereum 2.0 Staking Contract. Source: Beaconcha.in

Thus, the ETH price could see significant effects if stakers decide to cash out after three years. However, Glassnode estimates that around 170,000 ETH will be withdrawn from the Beacon Chain following Shanghai, and the impact will likely be manageable.

Out of this, 100,000 ETH (equivalent to $190 million) will be sold by validators to realize profits, while the remaining 70,000 ETH will be retained for liquidity. Even in the extreme scenario where all the ETH is sold, the selling pressure would still be within the average weekly cash flow of Ethereum, according to Glassnode.

Data from Nansen also reaffirms that only around 4,000 individuals are waiting to withdraw 142,000 ETH (approximately $270 million) in staking funds. This represents just over 1% of the total validators and staked ETH. Moreover, not all validators can withdraw funds simultaneously due to daily limits. "Currently, 8 validators can exit per epoch, meaning that 1,800 validators can fully withdraw their staked ETH each day," a representative from on-chain data analytics firm Nansen shared with CoinDesk.

Thus, those who have staked 32 ETH directly as independent validators can choose to withdraw only their rewards—i.e., profits from the initially staked ETH—or request to withdraw the entire amount, including both principal and earnings, from the blockchain. The second option may take several days to complete.

For those who chose to stake through intermediaries, it is essential to check each platform's ETH unlock schedule. According to announcements, Lido will open ETH withdrawals in mid-May with its own protocol upgrade; Coinbase will begin processing unstaking requests within approximately 24 hours post-Shapella; while Rocket Pool has yet to announce its ETH unlock timeline.

Just minutes before the upgrade, ETH spiked to $1,925 but has since hesitated, trading around $1,915.

15m Chart of ETH/USDT on Binance at 05:40 AM, April 13, 2023

It's worth acknowledging that Ethereum's journey to "Shanghai" has been quite arduous, involving numerous trials, issues, and delays, including the removal of other network improvements and avoiding minor technical adjustments to expedite the anticipated upgrade.