The Shanghai Upgrade, an upcoming hard fork on the Ethereum network, has been causing excitement and anticipation among market participants. One of the main features of the upgrade is that it will allow for the withdrawal of previously staked ETH, which has been locked up on the Beacon chain since the end of 2020. This is a significant development for long-term Ethereum holders who have been earning a staking yield on their tokens but cannot access them. The ability to withdraw these tokens is expected to increase liquidity in the market.
Implications for Ethereum and Related Protocols
The smooth merge of the Ethereum network without any complications is among the most underrated feats that have taken place in recent times. With the merge behind us, the focus has shifted to the Shanghai Upgrade, which is expected to be a major catalyst for the market. The upgrade is keeping a large majority of market participants on edge, and many are wondering what implications it will have for Ethereum and related protocols.
Staking Statistics and Market Share
As of now, 13.84% of the total Ethereum supply is staked, which amounts to 16.6M ETH. However, it’s important to note that a large cohort of these stakers are currently underwater from their ETH deposits and may not necessarily feel the need to sell. The first batch of lockers in December 2020 and January 2021 is the main concern as they are among the sole 15% of lockers of all deposited ETH that are currently in profit. The remaining 85% is underwater. While some of the rewards accumulated might be sold to hedge and balance one’s portfolio, there is a high likelihood of relocking taking place.
Protocol Diversification and Benefits
The protocol that is expected to benefit the most from the Shanghai upgrade is Lido, which currently has the largest market share, staking 29.23% of all staked tokens. However, Decentralization maximalists will take necessary action to protect Ethereum by diversifying from Lido into Rocket Pool to spread out the staking market share. Rocket Pool also lowers the barrier of entry to stake from 32 ETH to 16 ETH, making it easier for a larger amount of people to stake through their services.
Expected Increase in ETH Staked
As alluded to, despite the diversification of the market share when the withdrawals are enabled due to the Shanghai upgrade, the LSD protocols will most likely do well anyway with the expected increased share of ETH that will become staked over time. This incredibly profitable business model won’t go away anytime soon.
Conclusion: The Future of Ethereum and Related Protocols
In conclusion, the Shanghai Upgrade is expected to have significant implications for Ethereum and related protocols. It will enable the withdrawal of previously staked ETH, which is a significant development for long-term Ethereum holders. The protocol that is expected to benefit the most from the upgrade is Lido, which currently has the largest market share. However, diversification is necessary to protect the network, and Rocket Pool is expected to play a crucial role in this regard. With the expected increased share of ETH that will become staked over time, the LSD protocols are expected to do well, making it a lucrative business for market participants. Overall, the Shanghai Upgrade is an event to watch.
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