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Ethereum’s eagerly anticipated Shanghai upgrade, which will enable the withdrawal of staked ETH, will likely occur in the first two weeks of April, the network’s core developers determined on a call Thursday.
Ethereum’s developers now plan to launch the Goerli testnet, essentially a comprehensive dress rehearsal of the Shanghai upgrade, on or around March 14. About a month later, should everything proceed smoothly, the actual Shanghai software update will go live mid-April.
The exact timing of Shanghai’s implementation has been particularly closely watched due to the upgrade’s seismic financial implications. Ever since Ethereum began transitioning to a proof-of-stake model—in which Ethereum transactions are validated by users who have staked ETH with the network—those same users have accumulated rewards for their network participation in the form of newly generated ETH. Since ETH staking began in December 2020, a whopping $28.7 billion worth of ETH (and counting) has been deposited with Ethereum. That’s about 14.5% of all ETH in circulation.
Those funds and the rewards they’ve spawned, however, are not yet available for withdrawal. Making it possible for Ethereum users to withdraw their staked ETH is the core component of Shanghai.
By far the largest entities currently staking with Ethereum are intermediary staking services like Lido and crypto exchanges such as Coinbase, Kraken, and Binance. Those four companies, which pool together customers’ ETH to stake them and earn passive rewards, currently account for 56% of all ETH staked with the network, according to Dune Analytics.
Those firms—many of which have sagged in the current crypto winter—have a clear incentive to start churning out staked ETH rewards to customers and skimming fees off the top. JP Morgan analysts predicted in January that the Shanghai upgrade alone could “usher in a new era” for struggling crypto exchange Coinbase. The investment bank estimates that staking could earn Coinbase between $225 million and $545 million in revenue per year.
With so much riding on the upgrade, Ethereum’s core developers have scrambled to get Shanghai out the door as quickly as possible. The network’s developers removed other anticipated and much-need improvements to the Ethereum network from Shanghai to hasten its release, and even avoided adding minor technical tweaks to Ethereum’s encoding methods to the upgrade, in a decision that could create technical debt for the network in years to come.
“It feels like we’re not thinking about the long-term health of Ethereum,” said core developer Micah Zoltu, who protested those decisions, during a developers’ meeting on the subject in January. “We’re thinking, ‘How do we do what the public wants, today?’”
Sacrifices made to speed up Shanghai’s release, however, may have been in vain—now that the upgrade is slipping, even if slightly, from its original release schedule.