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Ethereum, the second-largest cryptocurrency by market capitalization has successfully executed its Shapella hard fork on April. 12. 2023. The upgrade is a major milestone for the network, as it enables validators to withdraw their staked Ether (ETH) and rewards from the Beacon Chain, the proof-of-stake layer of Ethereum.
The Shapella hard fork was proposed in Ethereum Improvement Proposal (EIP) 4895, which specifies how staked ETH can be transferred from the Beacon Chain to the Ethereum Virtual Machine (EVM), the execution layer of Ethereum. Validators can access their funds before the Eth2 roadmap is completed, which will make Ethereum fully proof-of-stake instead of proof-of-work.
The Shapella hard fork is considered the most significant upgrade since The Merge, which took place on Sept. 15. 2022 and eliminated the need for energy-intensive mining on Ethereum. The Merge also marked the end of the original Ethereum chain, which is now referred to as Eth1.x.
The Shapella hard fork has been eagerly anticipated by the Ethereum community, as it unlocks over 18.1 million ETH that have been staked on the Beacon Chain since its launch in December 2020. At current prices, this amounts to over $34.8 billion worth of ETH that can now be withdrawn and used for various purposes, such as trading, lending or staking on other platforms.
The Ethereum Foundation has implemented several mechanisms to prevent a sudden influx of ETH supply from hitting the market and potentially affecting the price. For instance validators can only withdraw their staked ETH in batches of 32 ETH at a time and they have to wait for at least 27 hours before they can initiate another withdrawal. Additionally, validators who withdraw their staked ETH will stop receiving rewards and will lose their voting power on the Beacon Chain.
The Shapella hard fork also brings other benefits to the Ethereum network, such as reducing gas fees for developers who use the EVM and improving interoperability with other blockchains. The upgrade is part of a series of improvements that are planned for Ethereum in 2023 including the Shanghai and Capella hard forks, which will introduce further optimizations and features to enhance the performance and security of the network.
The Shapella hard fork is a testament to the innovation and resilience of the Ethereum community, which has been working tirelessly to deliver a scalable, sustainable and decentralized platform for the future of finance and beyond.