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The planning of Ethereum Shanghai began in 2022 Q3 with aims to bring the withdrawal function to staked ETH following the Merge. With the successful launch of the Merge in September 2022, the community shifted the focus to Ethereum Shanghai.
(Source Twitter)
On Feb 28, 2023, a core developer shared on Twitter that Shapella went live, which was the first time the name “Shapella” came to light.
The announcement from Ethereum Foundation on March 28, 2023, confirms the official use of Ethereum Shapella.
(Source: announcement)
Shapella = Shanghai + Capella
Shanghai is the location of Devcon 2, and Capella is the brightest star in the northern constellation of Auriga.
The Merge refers to the integration of the legacy execution layer with the new proof-of-stake consensus layer. The execution layer will undergo the Shanghai upgrade, while the consensus layer will perform Capella upgrades. As such, developers cleverly refer to the upgrade as “Shapella.”
The Shapella upgrade is expected to be completed on April 12, 2023, estimated by developers during the 157th AllCoreDevs Execution Layer meeting.
Ethereum Users
No impact if you do not own staked ETH.
Ethereum Investors
Improved liquidity
Ability to withdraw Staked ETH, albeit subjected to limits.
Staked ETH will see a stronger peg to ETH during periods of extreme volatility.
Ethereum Stakers and Node-Operators
ETH stakers and node operators will be required to upgrade the Ethereum client. Please refer to the Withdrawal FAQ issued by Ethereum Foundation.
Price movements of tokens are affected by a combination of fundamental and technical factors. It is no doubt that each Ethereum upgrade contributes to fundamental improvements in the Ethereum network, regardless of mainnets or its Layer 2 ecosystem.
However, the short-term price movement is always unpredictable as it is usually impacted by macro events and short-term market sentiments. Despite the unpredictability of short-term price movements, let’s dive into examples and lessons drawn from previous events.
What happened
(Source Bybit)
Ether led the market bull run from June 2022 to Aug 2022 as the timeline of The Merge gets progressively clearer.
Ether jumps from $1,000 to $2,000, with the ETH-BTC ratio surging from 0.05 to 0.084 during the same period.
Unfortunately, right after the Merge, Ether’s price free-fell from $1,700 to $1,300.
Will it happen this time?
No one knows. Nonetheless, there are many differences between this upgrade compared to The Merge.
Ethereum has underperformed Bitcoin in this 2023 bull run, with the ETH-BTC ratio dropping YTD continuously.
It was only recently that the ETH-BTC ratio showed signs of a turnaround.
The recent price trend has yet to see the hype surrounding Ethereum priced into Ether, leaving room for a "sell the news" drawdown in possibly a much lower magnitude relative to the past.
First thing first, Ethereum Shapella is a follow-up of the Merge. As such, there is no widespread impact on the Ethereum ecosystem itself or its competitors.
Gainers
Liquid staking tokens: LDO, RPL, FXS
Liquid staking tokens are the primary beneficiaries of the Ethereum Shapella upgrade, which received a tailwind from the enhanced liquidity as staked ETH holders can freely stake and withdraw upon the completion of Ethereum Shapella.
Layer 2 tokens: OP, ARB, MATIC
Following the two successful upgrades of The Merge and Shapella, Ethereum has proved again to be the most vibrant smart contract platform, with protocols potentially flocking to Ethereum Layer 2 rollups instead of alternative Layer 1s.
Potential Losers
Alternative Layer 1s
The industry has argued over an Ethereum-centric future (Ethereum mainnet plus Layer 2s) or a future of multi-chains (multiple Layer 1s). As Ethereum shifts more upgrades and technology advancement in ZK-EVM, the Ethereum ecosystem has become more competitive.
There has yet to be an official announcement from the Ethereum Foundation. However, below is an Ethereum roadmap envisioned by Vitalik Buterin.
(Source: Twitter)
The Merge -> The Surge -> The Scourge -> The Verge -> The Purge -> The Splurge
To be concise, Shapella is still in the first stage – The Merge, with the goal of having an ideal, simple, robust, and decentralized PoS Consensus.
The next stage, The Surge, aspires to get the transaction speed of the Ethereum network up to 100,000 transactions per second and beyond.
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