Ethereum Shapella Upgrade - What's Happening?

The buzz around Ethereum is growing currently as the highly anticipated Shanghai upgrade aka "Shapella" is live on the Ethereum Mainnet. If you're scratching your head, wondering what on Earth that means, don't worry – I've got you covered. Always have, and always will. 🫡

What Is Shanghai (or Shapella) Upgrade?

With the Shanghai upgrade, Ethereum's transition to the Proof of Stake consensus model is complete by enabling staked ETH withdrawals.

Ethereum has two layers:

Execution
Consensus (Beacon Chain)

The overall upgrade affects both layers. Shanghai on the execution layer and Capella on the consensus layer. The name Shapella combines Shanghai (host city of Devcon 2) and Capella (the brightest star in Auriga's constellation). Now you get it, right?

The most critical update is Shanghai (EIP-4895) which unlocks Ethereum (around 18.1m) that was staked for years by validators all over the world. Why? well, that's another story and I am not wasting time explaining everything from the beginning. Watch some videos on YT if you want to. Sorry, I got you only half-covered. 😂

Anyways, validators are withdrawing in a queue system, and it's not all unlocked at once although they can choose to withdraw in full or in parts. Many folks on crypto Twitter were worried that it will unlock all at once, giving an opportunity to dump the price of ETH. Right now, it is hovering around $2000 and looking good so I am not sure if there's any other reason to worry.

Other upgrades focus on cutting down those pesky gas fees when the network gets super busy. This aims to make transactions on the Ethereum network more affordable and efficient.

Why Does It Matter?

This releases around 18.1 million ETH back into circulation, providing validators with increased liquidity and flexibility. Now they can use they crypto however they want to. Also the reduction in gas fees will improve the user experience. So all in all the Shanghai (or Shapella) upgrade is a massive step forward for Ethereum making it more decentralized, secure, and scalable.