The upcoming Ethereum Shanghai upgrade is a hard fork scheduled for March 2023 that brings a set of major changes to the Ethereum network. The key change in the upgrade is EIP-4895, which will allow stakers and validators to withdraw their staked ETH from the Beacon Chain. Currently, 14% of all ETH are staked, accounting for over $26 billion in value, representing 16 million locked ETH.
For validators, the Shanghai upgrade marks a significant milestone as they will finally be able to unlock their staked ETH and potentially sell if they wish to do so. Some validators may choose to unlock their tokens and exit the Beacon Chain completely, but others will likely choose to stay and continue earning yield from their staked ETH.
Aside from EIP-4895, the Shanghai upgrade also includes several other Ethereum Improvement Proposals (EIPs) aimed at reducing gas fees for developers and improving the overall efficiency of the Ethereum network. These EIPs include EIP-3651, EIP-3855, EIP-3860, and EIP-6049, which all aim to lower gas costs and cap fees for developers.
The market impact of making billions in locked ETH available for unlocking remains to be seen and may represent a significant market risk to Ethereum holders. Another significant upgrade, EIP-4844, which aims to split the Ethereum blockchain into multiple shards for enhanced scalability, has been pushed back and is not included in the Shanghai upgrade. In preparation for the upgrade, developers have already been stress testing the code changes.