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Here’s what every ETH holder should know about Ethereum’s Shanghai Fork

In this post:

  • Essential information about the Shanghai fork
  • Stakers anticipate the fork
  • Staking protocols are hoping to grab huge market shares

Ethereum users anticipate the long-awaited Shanghai fork, which complements the present proof of stake mechanism. Before now, Ethereum used to run on the PoW mechanism. This meant that the network validation was solely the miners’ responsibility. As a result, the miners charged little fees to carry out their duties and, in turn, enabled optimum security across the network. However, the shift eliminated miners and gave room to stakers.

Stakers anticipate the Shanghai fork

One of the few reasons Ethereum phased out miners was the expensive cost of transactions and the intensive energy used to mine the asset. To combat this, Ethereum introduced The Merge, which saw the network transition from PoW to POS mechanism. In this new mechanism, stakers would pledge a part of their assets to earn rewards on the network.

With this, Ethereum users have been staking their assets. But while the network has recorded deposits and paid out returns over the years, the stakers still need to receive their ETH. However, March will signal the launch of the Shanghai fork, enabling withdrawals from the beacon chain for stakers. This means that all the staked Ethereum that has accrued interest since inception will be open for withdrawal.

Staking protocols are hoping to grab huge market shares

According to a detailed analysis, about 14% of the total Ethereum supply is presently staked. When the new Shanghai fork comes to life, the asset owners can choose to unstake everything. However, Ethereum will not enter the market immediately. Instead, the withdrawals will be queued because it takes longer for a staked asset to be unstaked. However, some protocols allow users to stake their asset without locking them up. By doing this, users submit Ethereum and are given another token that serves as a receipt for the staked asset.

Some of the few reasons people use these protocols are because they don’t have the required assets to run their node, while some are impatient to wait till the period of withdrawal. A typical example of these protocols is Lido which has successfully staked about 5 million ETH. However, there might be a slight change in the staking landscape with other lesser protocols hoping that the staked token percentage rockets, opening the way for them to enjoy a bigger market share when the Shanghai fork launches.

The information provided is not trading advice. Cryptopolitan.com holds no liability for any investments made based on the information provided on this page. We strongly recommend independent research and/or consultation with a qualified professional before making any investment decision.

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