Shanghai: The upgrade that unlocks the power of Ethereum stakers

Why is Shanghai the change that many were expecting?

When Ethereum completed its transition to the Proof of Stake mechanism in September 2022 with The Merge, it marked a historic milestone for the network. However, a critical functionality remained pending: users who deposited 32 ETH as validators to secure the network could not withdraw their funds. The Shanghai update (EIP-4895) precisely addresses this issue, allowing stakers to regain access to their liquidity.

The context: From mining to staking

Before The Merge, Ethereum operated on Proof of Work, where miners used specialized equipment to validate transactions. This system, although secure, consumed enormous amounts of energy. With the implementation of Proof of Stake on Beacon Chain ( activated in December 2020), users gained a more efficient alternative: locking 32 ETH as validators to participate in block validation and earn rewards.

The problem was that, from the launch of Beacon Chain until the arrival of Shanghai, those funds remained completely locked with no option for withdrawal. This created uncertainty among participants and limited the appeal of native staking.

What does the Shanghai update bring?

The EIP-4895 improvement proposal is not just another technical update. It represents the restoration of a fundamental functionality that should have been there from the beginning. Ethereum developers agreed in January 2023 to implement it as a hard fork scheduled for March 2023, with public testing available by the end of February.

Once activated, stakers can:

• Withdraw your locked ETH completely (32 ETH minimum)
• Access the accumulated rewards from staking
• Maintain or abandon your role as a validator according to your preferences

Market Impact: What You Need to Know

Unlocked liquidity

According to staking data, approximately 13.81% of the total ETH supply was staked at the time of this analysis. With Shanghai enabling withdrawals, a considerable amount of liquidity will be unlocked. This means that many holders will have the option to sell their staked positions or hold them depending on market conditions.

The effect on the price: Possible scenarios

There is no certainty about how the price of ETH will react. On one hand, some speculate that allowing withdrawals could create short-term selling pressure. On the other hand, the upgrade may make direct staking more attractive to users who previously rejected the mechanism due to permanent illiquidity.

Change in the liquid staking landscape

Liquid staking protocols ( that offer tokens representing staked ETH ) have gained popularity precisely because they allow for maintaining liquidity. With Shanghai, native staking becomes more competitive. Users who previously needed these protocols can now stake directly on Ethereum without sacrificing access to their capital. This is likely to affect the prices of native tokens associated with liquid staking platforms.

How does it affect you according to your situation?

If you are a direct staker You regain total control over your capital. You can withdraw, reinvest, or reposition according to market conditions. The pressure of “not being able to exit” disappears, significantly improving the staking experience.

If you are a trader or passive investor You should monitor the evolution of the ETH staking ratio. A significant decrease could indicate that holders are withdrawing funds from staking, which could affect supply and demand dynamics. An increase could suggest that staking conditions are becoming increasingly attractive.

If you participate in liquid staking The value proposition of these protocols changes, but does not disappear. The market should balance towards options that offer higher yields or additional features beyond simple liquidity.

Why this matters for the entire network

Shanghai promotes a more efficient ETH market. By allowing holders to react freely to staking conditions, artificial restrictions on the circulation and price of the token are eliminated. This not only benefits individual stakers but also contributes to the overall health of the Proof of Stake mechanism.

The Shanghai upgrade represents the maturation of Ethereum as a fully functional Proof of Stake network. Along with The Merge, it fulfills one of the most anticipated goals by the community: a secure, efficient, and accessible validation system that does not sacrifice the liquidity of participants.