The much-anticipated Shanghai Upgrade for Ethereum marks the latest development in the blockchain space this week. 🌐
The Shanghai hard-fork upgrade will complete Ethereum’s transition to a proof-of-stake network from a proof-of-work network, which will bring about significant improvements in the world’s second-largest blockchain network. 🚀
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The upgrade will also allow those who have staked ETH on the network to start making withdrawals for the first time. Market participants expected these withdrawals to drag ETH prices lower in the near term – however, it seems the opposite occurred, as Ethereum has been up 10% in the last 5 days. 📈
There are more than 120 million ETH in circulation, and over 15% of the tokens are staked, according to data from Nansen. Another report from Coindesk claims ETH worth $2.4 billion may be sold once staking restrictions are lifted. 💰
The final lap of Ethereum’s proof-of-work to proof-of-stake journey begins now – Ethereum’s Beacon Chain, a PoS-based network, was launched in December 2020 and merged with the live PoW blockchain in September 2022. With the Shanghai update, Ethereum users can now un-stake their ETH, marking the final step in this transition to PoS. ➡️
So, how will the transition benefit blockchain players? 🤔
1. The Proof-of-Stake consensus mechanism is considered more energy-efficient compared to proof-of-work (PoW), which requires significant computational power to validate transactions. This shift to PoS could reduce the carbon footprint of the blockchain industry and improve its sustainability.
2. PoS allows for greater decentralization by attracting participants. Here validators are randomly selected based on the staked ETH, rather than their computational power and resources.
3. The PoS transition could improve the scalability of Ethereum, allowing for faster and cheaper transactions compared to the current PoW-based system.
4. Finally, the transition is expected to improve the security of the network by reducing the risks associated with the centralization of mining power, which could make the network more resistant to attacks and potential network failures.
With the completion of Ethereum’s upgrade, there are new opportunities for innovation and development in the industry, and we can expect more significant advancements and progress in the future. 🙌