Ethereum Shanghai Upgrade: How Did It Affect ETH Price? What It Means For Investors
The Shapella upgrade, also known as the Shanghai upgrade, represents the most substantial transformation for Ethereum since the ‘Merge’ last year.
On April 12, Ethereum (ETH), the second-largest cryptocurrency by market capitalization, successfully completed the Shanghai upgrade. This event was highly anticipated throughout the crypto industry and has resulted in ETH price surpassing the $2,000 mark for the first time since May 2022. With this upgrade, users can now withdraw their ETH, which had been locked up for rewards.
What Is The Shanghai Upgrade?
The Shapella upgrade, also known as the Shanghai upgrade, represents the most substantial transformation for Ethereum since the ‘Merge’ upgrade implemented last year, which revolutionized the blockchain's operational procedures.
Prior to the ‘Merge’ that occurred in the previous year, Ethereum depended on ‘miners’ who employed computers to tackle intricate mathematical problems to safeguard the blockchain by managing transactions. Before the Merge there was a significant amount of impact on the environment from these mining operations. The incredibly enormous consumption of energy, coupled with the carbon emissions, was a cause of concern.
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Presently, the network is reliant on ‘validators’ who stake or immobilize their coins to authenticate new transactions. These validators are granted specific amounts of fresh coins, enabling them to earn passive income without disposing of their holdings.
The Ethereum Foundation has reported that the implementation of the 'Merge' has led to a reduction of over 99 per cent in Ethereum's energy consumption. However, a drawback was that coin holders who had staked their coins were unable to unlock them.
What Is The Importance Of The Shanghai Upgrade?
The significance of the Shanghai upgrade lies in the fact that it enables validators to withdraw their coins through two primary methods of unstaking: partial withdrawal and full withdrawal.
When stakers retrieve the rewards they have earned from staking but keep the initial ether staked, it is referred to as a partial withdrawal. Conversely, a full withdrawal occurs when stakers redeem their original principal and withdraw completely, enabling validators to completely unstake their accumulated ETH and rewards.
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Will Shanghai Upgrade Affect ETH Prices?
After the Shanghai Upgrade, we have seen a surge of positive momentum around the price of Ethereum. However, most cryptocurrencies are trading positively due to mildly encouraging US inflation data. Nonetheless, if the entire supply of staked ETH is withdrawn and sold, there may be increased volatility ahead. Nevertheless, regardless of whether or not there are any sell-offs, it is probable that Ethereum will experience long-term value growth as a result of its recent upgrades.
What Should Investors Keep In Mind?
Ethereum, being one of the top cryptocurrencies in the market, boasts a substantial market capitalization and an unlimited supply, setting it apart from Bitcoin. Its extensive utility and frequent updates, alongside a growing user base, make it a promising investment opportunity. Holding onto this crypto can yield fruitful outcomes. Nevertheless, conducting thorough research prior to entering the market is crucial for optimal results.
(The author is the CEO and co-founder of Mudrex, a global crypto investing company)
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