Over the past couple of weeks, an issue that had the Ethereum (ETH) community concerned about has finally been put to rest, just as we had predicted in our blog post about this issue at the end of November - that it will be eventually resolved with a positive outcome. This issue is with regards to the withdrawal of staked ETH on ETH 2.0, which investors assumed was postponed indefinitely because the proposed timeline had been removed from the ETH Foundation website. Now, investors finally can cheer that not only has the timeline been put back on, it is now at an even earlier date than investors initially expected - that their staked ETH will be able to be withdrawn beginning March next year.
How Did the Issue Come About
The issue first came to the forefront when the ETH Foundation removed the proposed improvements to be done at its Shanghai upgrade, which was supposed to include the unlocking of staked ETH. The types of upgrades that would be included at Shanghai had been removed ahead of a scheduled meeting with ETH developers to decide on the final list of upgrades that would be included in Shanghai. However, this move was misinterpreted by the market to mean that the withdrawal function had been cancelled, which was not the case. The market simply had become too paranoid after the contagion effects from the FTX downfall started to materialise and who can blame them for it.
Eventually, on December 8, ETH developers decided on a date to implement the Shanghai upgrade, which is slated to be complete by March 2023. This upgrade, referred to by developers as EIP 4895, would include the ability to withdraw staked ETH for stakers on the Beacon Chain. Developers are aiming to launch the public testnet for Shanghai around December 15 or 16 and to start mainnet shadow forks in mid to late January. In essence, the process to enable the withdrawal of staked ETH is going to be set in motion in about a week’s time and developers have agreed to focus their efforts in the coming month to make sure this process goes as smoothly as possible.
What Other Upgrades Are in Store
Other than the withdrawal function, other upgrades for the upcoming Shanghai upgrade, which involves a hard fork of the ETH blockchain, will include the implementation of the "EVM Object Format" (EOF), which is a collection of Ethereum Improvement Proposals (EIPs) that essentially upgrade the Ethereum Virtual Machine (EVM), the environment where Ethereum is able to execute smart contracts. Those EIPs are EIP 3540, EIP 3670, EIP 4200, EIP 4570, and EIP 5450. However, this series of upgrades is not set in stone and should developers next decide in another follow up call on January 5 that these are too complicated to be implemented by March 2023, they can be pushed back to the fall of next year.
However, the staked ETH withdrawal function will be a confirmed upgrade and will not be postponed because all the requirements to fulfill this upgrade have already been met, thus, investors need not worry that this would be pushed back again.
Developers have also scheduled another hard fork after Shanghai sometime in the fall of next year that would address another significant scaling upgrade known as proto-danksharding, referred to as EIP 4844. Incidentally, this was the complicated upgrade that was initially planned to be in Shanghai which was deemed too difficult to achieve by March, which was the real reason behind the removal of all upgrade timelines in November which started the false alarm about the withdrawal function. That removal had nothing to do with the withdrawal function at all. Now that it is confirmed that EIP 4844 would be pushed back further without affecting EIP 4895 (withdrawal of staked ETH), investors ought to put their minds at ease.
To elaborate a bit more on EIP 4844, it is an upgrade that would make ETH more scalable through sharding, a method that splits up the network into “shards” as a way to increase its capacity and bring down gas fees. This would make ETH more cost effective than it already is now to use.
In the developers call yesterday, ETH developers agreed that breaking up the two big upgrades into two different forks will give developers enough time to focus on each issue and alleviate stress for those who have their ETH (and any accrued rewards) locked in the Beacon Chain staking smart contract, which shows that the team at ETH do take into consideration the feelings and welfare of its community, which is an appreciated quality in this day and age within the crypto space.
Crypto Market React Positively to The News
The announcement of the good news has managed to get the crypto market moving slightly higher. ETH has moved around 4% higher after the news was confirmed when prior to this, the market had been under pressure and had retreated for a number of days. Sentiment in the market improved on the news, with the prices of Bitcoin and altcoins also showing some bounce. As more investors start learning about the news, prices may head higher. However, as we are nearing the final Fed meeting of the year in the upcoming Wednesday, macroeconomic events like the kind of guidance Fed Chairman Powell will give at the post Fed meeting press conference could override crypto market fundamentals in the near-term. Should the Fed chair be more dovish than expected, crypto prices could bounce together with stocks, but should he be more hawkish than investors expect, crypto prices may fall back lower again.
The above are the personal opinions of the author and should not be taken as the official view of the Margex platform. They are also not financial advice and are only meant to be informative in nature. Thus, they should not be construed as a solicitation to trade. Readers are strongly encouraged to do your own research, conduct due diligence, and assess your financial abilities before doing any investment or trading as these activities carry risks. Should you be in doubt, kindly speak with your personal financial advisor.