The next upgrade for Etherium will take coins out of the stack. When to expect the upgrade?
The next major update to the Etherium protocol, called Shanghai, is expected to be activated in March this year. In their first call of the year, the altcoin developers reached consensus that one of Shanghai’s features will be the ability to withdraw coins from the deposit smart contract. Accordingly, ETH stackers will be able to reach their coins soon enough.
As a reminder, the deposit smart contract went live in December 2020 following the activation of the Beacon Chain, which became a temporary PoS branch of the main blockchain. Transferring 32 ETH into a smart contract entitles the user to become a validator on the Etherium network. Generally speaking, validators confirm cryptocurrency transactions and verify that the network is up-to-date, for which they receive a fee.
In general, they became a replacement for miners last September, when Etherium completely switched to the new Proof-of-Stake consensus algorithm due to the so-called merger. This refers to the merger of Ethereum’s main chain with the already mentioned Beacon Chain.
As you can see from the chart below, by today, about 15.9 million ETH has accumulated in the deposit smart contract.
Volume of funds in the deposit smart contract
Meanwhile, according to Glassnode analysts, the indicator set another high the day before. We are talking about 15.91 million ETH in staking, which is now valued at $20 billion. It is this amount that stands at the head of blockchain security.
The number of coins in the Ethereum stack
Shanghai has a more specific date and a clear list of updates, which clarifies a lot for validators. Previously, it was known that their ETH would be locked in the deposit smart contract for a while, but the lack of clear conditions for unlocking and withdrawal was a serious reason to abandon the validator role. Now that the situation has been clarified for Etherium users, the cryptocurrency is likely to prove more popular for steaming.
Details of the Shanghai update to the Etherium network
One of the main components of the update is a significant reduction in fees for tier 2 solutions based on Etherium. This will make the altcoin more accessible and faster for use in decentralised finance. The second important update will be the optimisation of data storage and access on the blockchain. Finally, the aforementioned ability to withdraw one’s coins from the stack in a deposit smart contract will also belong to the update.
Incidentally, the lack of clear terms regarding the ability to withdraw ETH for validators could be cited as one of the reasons why Etherium has the lowest circulating supply of coins in stacking compared to other popular Proof-of-Stake projects.
As you can see in the chart below, the Solana network now has 68 per cent of SOL in circulation in its staking, while BNB’s corresponding figure reaches 90 per cent. The 14 per cent of Etherium is a really low result, which is probably due to the lack of clarity regarding the possibility of withdrawing ETH from the deposit contract. Fortunately, it has now emerged.
Volume of circulating coin supply in stacking for the most popular projects
According to Bloomberg sources, the issue of coin withdrawal was particularly important to developers during discussions about Shanghai features. Some of them wanted to fit more innovations into the upgrade, but that would have delayed the release date of the update. Instead, it was decided to sacrifice some features in order to release the upgrade as soon as possible and at the same time allow validators to take their ETH from the deposit smart contract.
As a reminder, in 2022, the business of some crypto-platforms built around making money from stealing was completely wiped out by the market crash. For example, Celsius faced a liquidity crisis in the summer of 2022 due to the decoupling of stETH exchange rate from regular ETH.
However, it takes time for the ETH stack to grow in popularity: recall that even before the move to Proof-of-Stake, the ETH merger was causing optimism among many investors, but after it, the price of ETH only collapsed noticeably lower. Of course, the bearish trend in the digital asset market as a whole had an impact here, but still.
Etherium exchange rate for the year
Shanghai, on the other hand, could have the exact opposite situation: at least that’s what a popular cryptocurrency enthusiast nicknamed Elite Crypto is sure of. He tweeted that a March upgrade of Etherium could bring the price of the altcoin back to the level at the time of the FTX cryptocurrency’s collapse last year. Here’s his quote, cited by CryptoSlate.
It will be interesting to see how the Shanghai upgrade spurs a bullish trend for Etherium. Who knows, maybe the cryptocurrency will manage to get back to $1,600?
Ethereum developers
We believe that the possibility of withdrawing coins from the Ethereum network's stacking will really make the activity more popular. After all, in that case users will understand that their coins won't be stuck in a deposit contract for an indefinite period, so it will be easier to send coins there. Well, the growth of coins in stacking will increase the security of the blockchain, which is also good news.
What do you think about this? Share your opinion in our Millionaire Crypto Chat. There we will discuss other important developments related to Etherium and other popular digital assets.
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