With the “Merge” and the accompanying change to proof of stake, the Ethereum blockchain received arguably the most crucial and largest upgrade of all time on September 15. With “Shanghai”, however, the next upgrade is already just around the corner.
The 148th All Core Developers meeting (ACD), took place last Friday after a long break of a month. The developers met with Tim Beiko, from the Ethereum Foundation. They discussed plans for Shanghai.
The core developers came up with the consensus that Shanghai should have at minimum the withdrawals of staked ETH. They also agreed to three minor network optimizations: EIP 3651, 3855 and 3860. The core developers also reached an agreement with each other to review EIP 4844, Ethereum Virtual Machine Object Format code changes and EIP 3855 for possible inclusion in Shanghai’s upgrade.
Developers are also looking into proto-danksharding (EIP 4844), another much-discussed update. A preliminary version of Ethereum’s sharding, proto-danksharding introduces an entirely new transaction type. This can be used to quickly settle transactions in batches from layer 2 rollups.
Representatives of Nethermind, Besu, and Nethermind raised concerns regarding implementation readiness. They stated that it is still not clear how complex and broad the code changes are.
What Impact Will Ethereum’s Shanghai Provide On Price?
Given that 15.51 million ETH have been staked at the moment, or 12.7%, it is possible for Shanghai to exert significant selling pressure.
Investors could have their first chance to sell their ETH in Shanghai, where some of them are staked for over two years. Even if half of staked ETH was retained, there would still be tremendous selling pressure.
Two crucial factors for the Ether price recently were the high proportion of illiquid ETH through the lockup of ETH and EIP-1559, also known as the “ultra sound money” upgrade. On August 05, a fee burning mechanism was implemented that erases all ETH base fees used to record Ethereum transactions.
The ETH supply will decrease when more ETH is lost through fee burning than it is generated through issuance.
The date of the upgrade has not been set by core developers. The progress of protodanksharding could lead to a hardfork with staked EIPs only and no withdrawals. Shanghai Part One may arrive in February 2023. Shanghai Part Two, which will be primarily focused on proto-danksharding and would then be integrated into the mainnet by September.
In contrast, bundling all EIPs in one hard fork could mean that Shanghai happens “sometime in June or July”.
Ahead of today’s FOMC meeting, ETH investors seem to remain cautious. While the price moved lower than the 200-day average but higher than the 100-day average, the average is not changing.