All You Need to Know About the Ethereum Shapella Upgrade

Since the launch of the Ethereum network in 2015, the blockchain protocol has consistently attained new heights. Thanks to the extensive and detailed roadmap by Vitalik Buterin and Co, the Ethereum network will be reaching a new feat again.

The most recent upgrade on the Ethereum network is the Shapella Upgrade, set to take place in April 2023. But what exactly is the Shapella upgrade, and how would it affect the network?

What is the Shapella Upgrade?

The “Shapella Upgrade” is a term used to describe the Shanghai and the Capella upgrade on the Ethereum network. The term has been widely used across Ethereum communities by developers and participants. Notably, the Shanghai upgrade will update Ethereum’s execution layer, while the Capella upgrade will improve the consensus layer.

The Shanghai and Capella upgrade is expected to occur on April 12, 2023. The upgrade confirmation came after the Ethereum network launched the Goerli testnet around mid-March. Notably, the expected due date may be pushed forward if the ecosystem experiences significant roadblocks close to the period.

The Shanghai and Capella (Shapella) upgrade will enable ETH stakers to unlock their staked tokens for the first time. In December 2020, when the Beacon chain went live, the Ethereum team informed validators and stakers that all staked ETH would be locked for an unknown period.

Ether stakers contributed to the success of the transition from Proof of Work to Proof of Stake last year. Collectively, stakers allowed for the accumulation of enough ETH to secure the network. Staking ETH was also crucial to testing the PoS version of ETH on the Beacon chain before merging occurred. So far, more than 14% of Ether’s supply remains locked. But the Shapella upgrade will mark the start of an unlocking.

Preparing for the Shanghai and Capella Upgrade

Network validators and Ether holders or investors need to know the estimated period of the Shapella upgrade, needed actions, and the effects of the upgrade on the network. Notably, more actions need to be taken by validators rather than investors.

Updating Ethereum Clients

Validators must update their Ethereum clients to support the Shanghai/Capella upgrade. Additionally, validators will need to keep tabs on client communication channels for the latest information related to the upgrade. The most up-to-date info regarding the Shanghai upgrade can be found on the Ethereum Foundation Blog.

On the other hand, ETH holders do not need to take any action. All Ether tokens in decentralized and centralized wallets will remain intact. Further, users should avoid falling prey to scams. Several crypto scammers could use this period to announce fake airdrops or sway users into connecting their wallets to malicious platforms.

Claiming ETH Rewards

Ether rewards from the staking activity will be distributed to users automatically. Stakers would not need to pay gas fees to claim their rewards since the ETH transactions will occur on the execution layer. Further, the Ethereum Foundation announced that validators could claim partial or full rewards.

A partial withdrawal would mean a validator is claiming part of the staked ETH as long as the minimum amount required for validation (32 ETH) remains in the pool. Validators will continue to earn staking rewards when they utilize the partial withdrawal function.

For complete withdrawal, the validator exits the staking pool. Thus, there will be no new rewards once the existing rewards have been claimed. While partial withdrawals happen automatically, full withdrawals must be triggered manually.

Duration for Claiming Staking Rewards

Stakers would not be able to claim all their rewards at once. After the upgrade, a maximum of 115,200 validator withdrawals will be processed daily. This maximum withdrawal limit can be achieved only if no blocks are skipped. According to Ethereum.org, it would take approximately seven days for 800,000 withdrawals to be complete. With about 530,000 validators on the Beacon chain, it is estimated that the total duration for claiming all rewards would span 300 days.

Will Ether’s Price Tank After the Shanghai/Capella Upgrade?

Since the Shanghai/Capella upgrade will unlock previously staked tokens, investors may be concerned about the impact on Ether’s price. Interestingly, since ETH rewards will be released to validators gradually, the price impact may not be extreme.

Further, most validators who staked ETH may not be willing to sell. As Ether maximalists, they have held their crypto tokens for years and may not be willing to profit quickly from the release.

Finally, ETH staking rewards will continue to incentivize users. With the option to freely stake and unstack now on the table, Ethereum may attract more interest from institutional investors. Since stakers can now exit pools at any time, more investors may be willing to benefit from Ethereum’s ecosystem.

Will Ethereum Experience a Downtime?

Since the Ethereum chain went live in 2015, the blockchain network has never experienced downtime. Ethereum users expect a smooth upgrade, free of bugs or on-chain obstacles.

Ethereum’s Bug Bounty

To maintain the high-security level on the network and detect flaws early enough, Ethereum would be hosting a bug bounty program. The Ethereum Foundation announced that its maximum bug bounty reward would be worth $250,000. However, on March 23, 2023, Fredrik Svantes, a security researcher at the Ethereum Foundation, announced that the maximum Shapella bounty reward is now worth $500,000.

The Pathway to Ethereum’s Shapella Upgrade

From the Frontier thawing fork in 2015 to the Homestead fork in 2016, the Beacon Chain Genesis in 2020, the Merge in 2022, and the Shapella Upgrade, the ecosystem has been on a roll. Interestingly, the Beacon chain genesis serves as a foundation for the Shapella Upgrade today.

The Beacon chain started Ethereum’s transition from Proof of Work to Proof of Stake. In 2020, the Ethereum Foundation announced that it needed a minimum 0f 16384 validators to stake 32 ETH or more. Many Ether users responded positively to the transition call, and the network now has more than 530,000 validators.

Validators will gradually receive rewards for staking and securing the network in the coming months. While the Shapella upgrade seems to focus on the unlocking of rewards, there are a few other official improvements in this upgrade. Other noteworthy improvements are;

• EIP-3651: The genesis of the Coinbase address warm
• EIP-3855: New Push Instructions
• EIP-3860: Limit and Meter Init Code
• EIP-4895: Beacon chain push withdrawals
• EIP-6049: Deprecate Self-destruct

What’s Next in the Ethereum 2.0 Roadmap?

After completing the merge last year, Ethereum’s co-founder emphasized that the blockchain protocol still has a lot of future developments. Currently, Vitalik Buterin claims Ethereum has achieved just 55% of the goals on its comprehensive whitepaper. So what’s next? Users still expect the surge, the scourge, the verge, the purge, and the splurge.

The Surge

The Ethereum Surge is an upcoming stage of development for the Ethereum network, which includes a series of upgrades. The Ethereum roadmap outlines a plan to divide the network into 64 shard chains. The division will enable transactions to flow at a faster rate. Sharding can be likened to creating multiple channels or routes to ease network congestion. Notably, computation will be distributed across these shards in parallel, resulting in increased throughput. Each shard chain will operate with its own set of validators.

Additionally, the network will scale by offloading transaction execution to layer two blockchains. These layer-two chains, like zKsync and Optimism, have lower transaction costs. Hence, the Ethereum mainnet will primarily focus on consensus, settlement, and data availability. This approach is expected to enhance the overall scalability and efficiency of the Ethereum network.

The Scourge

The scourge will be the third stage in Ethereum’s development. This upgrade has two goals – decentralization and censorship resilience. The Ethereum merge seemingly reduced the level of decentralization on the network. However, the scourge aims at ensuring dependable and trustworthy transaction inclusion while minimizing centralization and addressing protocol issues arising from MEV.

The Verge

The verge will introduce verkle trees to the network for data sorting and verification. Currently, the network uses Merkle trees for data sorting. Ethereum users believe verkle trees will be more efficient than Merkle trees for data sorting. With the introduction of verkle trees to the blockchain network, Ethereum’s data storage process will be about seven times more efficient.

The Purge

The Purge is similar to the Verge. The purge will also make data storage on the Ethereum network more efficient. The Purge aims to streamline the Ethereum blockchain by removing outdated network history and implementing algorithms to truncate older blocks. Successful implementation of The Purge’s deliverables would allow node operators to only load the most recent blocks when synchronizing with the network.

With The Purge, network clients can choose the extent of network history they wish to access. Node operators who prefer to load older network versions can still do so. A specialized full synchronization function will be available for those who want to load the complete history of the Ethereum blockchain. However, only the latest history will be required for synchronization, making the process more efficient and streamlined.

The Splurge

The Splurge is a series of developments that will be implemented in the Ethereum network post the Ethereum 2.0 upgrade. This stage includes advancements in account abstraction, enhancements to the MEV-resistant and PBS algorithms, and modifications to the EVM, ZK-SNARKs, and other aspects deemed interesting and exciting by Ethereum developers.

The Splurge aims to ensure the continued progress and improvement of the Ethereum blockchain, building upon the achievements of the Ethereum 2.0 upgrade and driving innovation in web3, smart contracts, and other exciting developments.

Conclusion

The Shapella upgrade can be seen as another step on a track rail that leads to Ethereum’s final destination. With a lot in store for the network, Ethereum still has a long way to go. However, the success of previous upgrades and protocol developments will keep Ethereum community members positive throughout the development trajectory.