Ethereum Shanghai Upgrade: A Game Changer for ETH Investors?

This article will be the first in a series by OpenOcean focusing on the Ethereum network’s upcoming Shanghai Upgrade’s EIP-4895

About the Shanghai upgrade

In Q1 2023, the Ethereum Network will proceed with the Shanghai upgrade, known as ‘EIP-4895’. In September 2022, the Ethereum mainnet merged with the Beacon Chain, completing the blockchain’s transition from proof of work (POW) to proof of stake (POS). The POS mechanism required staked Ethereum to be locked to ensure stability until the rollout of the Shanghai upgrade.

Since September the Ethereum mainnet has locked these ETH staking tokens and only allows validators and stakers the chance to withdraw upon release of the Shanghai upgrade. The network update is expected to impact the proportion of ETH participating in staking relative to its overall supply. This change could then have an influence on the market supply and demand for ETH.

The price of ETH after the upgrade?

For most, the Shanghai upgrade will have significant ramifications in regards to circulating supply and staked supply, so whether you’re holding ETH, staking Ethereum, or using it as part of LP provision, it’s worth being in the know so you can make the right choice.

So what exactly is going to happen once the Shanghai upgrade goes live? Well price wise there could be a lot more volatility in the short term. The upgrade will unlock a lot of liquidity, whether this flows into more staking, providing LP’s for rewards or ends up being traded is still anyone’s guess.

On the whole, enabling withdrawals from staking promotes a freer ETH market, this should be seen as a net-positive effect because it reduces artificial control effects on the price and circulation of ETH.

Liquid Staking and Positioning Yourself

By far the biggest movement we could see could be the several different methods of staking liquid ETH. Various liquid staking protocols like Lido and Rocket Pool let ETH holders stake tokens without having to run a validator node, at the moment, liquid staking ETH accounts for 32.65% of staked ETH. And of course, if you are attached to CEX, you can also stake your ETH on popular exchanges like Binance or Coinbase.

Common questions surfaced after the merge were “how much ETH do I need to stake to run a node” or even “how do I stake ETH”. Individuals found it difficult to run a node because the requirements involve locking 32 ETH. This paved the way for liquid staking derivatives to thrive, liquid staking tokens fractionalise ownership of nodes and have increased in popularity due to easy accessibility and a lower price entry barrier.

Buying ETH for staking/holding/trading usually requires the use of an exchange, OpenOcean DEX Aggregator has some special features which were introduced to make it as easy as possible to make the most of the Shanghai upgrade. OpenOcean has already integrated Lido, Rocketpool, StakeWise to support stETH/rETH/rETH2 liquidity enabling traders to know that the rate they’re getting is guaranteed to be the best regardless of where it pulls their tokens from.

Ahead of time, you’ll want to have some idea of how you will be positioning yourself going into this period. If it is your ultimate aim to acquire and stack as much ETH as possible to trade, or maybe a ‘set and forget’ liquid staking option is what you’re looking for, either way there are several easy tools you can use to make the experience a lot easier.

For ‘stacking’ ETH you should probably consider setting DCA limit orders in order to purchase at the price you want. With OpenOcean you can set limit buys for any token (that means all liquid staking tokens are included) to make sure you get the best possible entry, best of all you can make as many DCA buys/sells as you want as it is ‘gasfree’ to create and cancel orders.

If buying Ethereum for the long term or trading ETH, using the traditional swap feature on OpenOcean will ensure you get the best price 100% of the time thanks to the way in which the platform can route trade orders using the unique-novel routing algorithm.

Making sure you’ve planned ahead of the upgrade could go miles towards easing the process around the time of the launch. Having funds available to either buy Ethereum or making sure your assets are on the chain to begin with is paramount for anyone looking to take advantage during the launch period. If in doubt there are several FIAT on-ramps available, most notably the Banxa portal on OpenOcean.

By using the advanced bridge and swap function by OpenOcean, we can eliminate most questions regarding “How do I bridge into ETHereum” or “How can I buy ETH from X chain”. You can simply connect a wallet and bridge into any Ethereum governance token, liquid staking token, or ETHereum itself, with OpenOcean’s advanced tools, they help you ask “where should I stake my ETH” instead of “how do I buy it?”.

Conclusion

No one knows what is going to happen price-wise or token-wise for that matter. What we do know is that the Shanghai upgrade is going to introduce several crucial features for Ethereum stakers who have been waiting ever since the initial move from proof-of-work to proof-of-stake. Whilst it’s unclear what the main intentions of #DeFi users will be once Shanghai goes live, one thing we know for certain is that this is a much needed upgrade and eventually should be net-positive for the token and chain going forward.

About OpenOcean

OpenOcean is the widest reaching DEX Aggregator and Web 3 middleware developer in the crypto space. Offering a suite of tools across 19 networks and 260+ unique sources of liquidity, OpenOcean is building tools for now and for the future. Experience what it’s like to trade with ease, the way that YOU want to with #OpenOcean.

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