After the Ethereum Shanghai upgrade was implemented on April 12, investors were advised to pay attention to certain areas related to Ethereum. The upgrade included EIP 4895, which was eagerly awaited by many investors because it allowed them to withdraw locked Ethereum (ETH) when staking out of the Beacon Chain.
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ETH Staking after Shanghai
After the Shanghai upgrade, as predicted by a large number of investors, the amount of ETH withdrawn from the Beacon Chain suddenly increased, estimated at over 18k ETH withdrawn in just a few hours. However, on the same day, there was also a significant amount of ETH deposited (over 17k ETH) to become validators.
Source: Dune Analytics
Because of this, instead of the price of ETH decreasing in the short term as many investors predicted, the price of ETH skyrocketed from $1800 to % in just one day.
Benefits
The Shanghai upgrade brought many positive values to Ethereum in the long run and was also a stepping stone for the next important upgrade – The Surge – which is expected to solve Ethereum’s expansion problem.
EIP-4895 in the Shanghai upgrade allowed validators to consider withdrawing assets during the staking process whenever they wanted. This also encouraged many long-term Ethereum holders to become validators to receive additional interest when holding for the long term. Therefore, we can also see a large inflow of ETH staking during the early period.
In addition, this upgrade also gave investors two options: withdraw a portion (withdrawal of rewards) or withdraw all (withdrawal of rewards and staked assets). Most investors in the market chose to withdraw rewards rather than withdraw all in this upgrade. This is also the reason why there was no selling pressure.
Basically, most validators are still at a loss from their ETH investment in 2020, so the best option is still to continue staking ETH and only withdraw the interest.
After Shanghai, what are the next narratives?
After Shanghai, areas that need to be noticed include the fact that EIP 4895 has helped increase the demand for staking ETH over time. This has been demonstrated through the increasing demand for staking ETH on Liquid Staking Derivatives (LSD) platforms, as well as the rising prices of tokens on LSD platforms such as LDO, RPL, FXS, etc.
Liquidt staking Derivatives Finance (LSDFi)
This is a new term that has recently appeared in the community. The increase in staking ETH on LSD platforms also helps increase the supply of LSD assets such as stETH, rETH, frxETH, etc. (for example, when staking ETH on Lido Finance, investors receive interest in the form of stETH). Investors can use these LSD assets to convert 1:1 to ETH or farm and stake on other DeFi platforms to earn double profits.
Protocols that provide good applications and liquidity for these LSD assets will attract funds and attention from investors. Some projects that help investors earn profits on LSD assets include Aura Finance, PendleFi, Balancer, 0xAcid, EtherFi, etc.
Distributed Validator Technology (DVT)
The high increase in staking ETH also comes with many issues regarding security and safety in staking. Distributed Validator Technology is expected to help solve this problem. DVT is a system that allows multiple nodes to vote for the validation of the ETH blockchain through a validator. The DVT consensus mechanism checks whether nodes agree or not and directs instructions to the verifier.
Projects that provide Distributed Validator Technology solutions include SSV Network, Diva Labs, Obol Network. Currently, SSV Network has announced that it will launch its mainnet this year.
Upgrades to Ethereum
After Shanghai, the upgrade team – The Surge, The Scourge The Verge, The Purge, and The Splurge are expected to further elevate Ethereum’s position and bring the open network to more users in the future. The latest upgrade is The Surge with the appearance of EIP-4844 (Danksharding), which is expected to help Layer 2 operate more efficiently by reducing costs and expanding the scale. The upgrade will thus boost the network’s speed.
The founder of Ethereum also emphasizes that fast and low-cost transactions will be what the network aims for after Shanghai. He recognizes the difficulties that investors have faced and are facing when trading on the network.
EIP-4844 is also expected to have a positive impact on Layer 2 Rollups, as transaction costs will once again be greatly reduced (if Ethereum drops by 1, Layer 2 Rollup drops by 10). This will also help Ethereum and the Layer 2 ecosystem around it, such as Optimism, Arbitrum, Zksync, continue to be positively received in the near future.
