Ethereum has activated the Shanghai hard fork yesterday at 22:27:35 UTC. Finalized in 15 minutes, the hard fork, also known as "Shapella" saw approximately 285 withdrawals worth roughly 5,413 ETH ($10 million) during its first half-hour in epoch 194,408.
The now combines key changes to the blockchain's Engine API, performance and initialization improvements to the execution layer (in Shanghai), as well (for Capella).
The hard fork is a landmark moment as it culminates Ethereum's multi-year journey from its original proof-of-work consensus mechanism to a proof-of-stake network. The opened staking withdrawals for users who have locked their ether ($ETH) to secure and validate transactions. The event ushers in a new phase of as it to a complete proof-of-stake system.
Released on January 23, 2014, the Ethereum whitepaper outlined the core concepts of the Ethereum blockchain, including its consensus mechanism, smart contracts, and decentralized applications. Although the original Ethereum whitepaper focused primarily on a proof-of-work (PoW) consensus mechanism, Ethereum has been transitioning to a proof-of-stake (PoS) mechanism since the launch of Ethereum 2.0.
is an alternative to PoW that offers several benefits, which can be inferred from the broader goals and principles mentioned in the whitepaper.
PoS is significantly more energy-efficient than PoW. In a PoW system, miners must solve complex mathematical puzzles to validate transactions and create new blocks, which consumes substantial computational power and energy. PoS also eliminates the need for resource-intensive mining, as validators are chosen based on their staked coins, reducing energy consumption.
In terms of security, PoS enables a more by making it more costly for bad actors to gain control. In PoW, an attacker would need to control 51% of the network's mining power to launch a successful attack. In PoS, an attacker would need to own 51% of the staked coins, which is often prohibitively expensive, especially for established cryptocurrencies like Ethereum.
At the core of its design and ethos, PoS promotes decentralization by reducing the reliance on specialized mining hardware. In PoW systems, miners with access to more powerful hardware have a disproportionate advantage, potentially leading to centralization. PoS, on the other hand, relies on validators staking their cryptocurrency, which is more accessible and encourages broader participation.
There are also economic incentives (which are not limited to the Ethereum blockchain itself) that proof of stake represents. A key factor to this is its alignment with the interests of validators, with spills over to the long-term success of the network. With PoS, validators must stake their cryptocurrency to participate, which creates a strong financial incentive for them to act in good faith and maintain the network's integrity. In the case of malicious behavior, validators also risk losing their staked coins, making it costly to attempt an attack.
While the Ethereum whitepaper did not explicitly detail the benefits of PoS, the move towards a PoS consensus mechanism is driven by the principles and goals of creating a secure, decentralized, and energy-efficient blockchain. The shift to PoS in Ethereum 2.0 aligns with the of a more sustainable and inclusive ecosystem.
Proof-of-stake systems require users to stake their cryptocurrency to help secure and confirm new data blocks. Before the Shanghai hard fork, users could not withdraw their staked ether or claim earned rewards. The price of ETH remained stable post-upgrade, as thousands participated in a Shapella Mainnet Watch Party hosted by Ethereum Cat Herders.
The absence of a significant price drop following the Shanghai upgrade defies typical trading patterns, which often see major events trigger sell-offs. However, ETH's value did drop by at least 8% when Ethereum initially transitioned to proof-of-stake in September.
The Shanghai upgrade permitted users to withdraw the previously inaccessible $35 billion in staked ETH. Analysts had forecasted that over $300 million worth of ETH would be liquidated immediately after Shanghai's launch, potentially flooding the market and causing prices to drop.
During the livestream, Ethereum co-founder Vitalik Buterin emphasized that, after the Shanghai upgrade, scaling to make transactions faster and cheaper would be the blockchain's next challenge.
"[the Ethereum community is] in a stage where the hardest and fastest parts of the Ethereum protocol's transition are basically over. Very significant things still need to be done, but those very significant things can be safely done at a slower pace."
Analysts have long argued on the prospects of the Shanghai hard fork leading to a price rally or crash for Ethereum. Now, the focus is on whether the successful hard fork will bolster market sentiment or cause stakers to redeem their ETH and sell their holdings in rush to liquidate their positions, effectively dumping Ethereum and creating selling pressure.
The Shanghai hard fork also introduced a new generation of "validators" to maintain the blockchain as Ethereum transitioned from proof-of-work to proof-of-stake during the "Merge" hard fork. Developers expect the proof-of-stake network to reduce Ethereum's energy consumption by 99% while enhancing its security and decentralization.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.