4 Things To Know About Ethereum's Shanghai Upgrade

investopedia.com:

Crypto watchers are setting their sights on Etherum this week, as the currency undergoes an upgrade that some think could have a negative impact on the price of the coin, at least in the short term.

Shanghai is an Ethereum upgrade that is scheduled to activate on Wednesday. Most notably, it will enable those who have previously staked their ether (ETH) on the network to make withdrawals for the first time, which some market commentators say could have negative implications for the ETH price going forward. The upgrade also includes the implementation of five different Ethereum Improvement Proposals (EIPs).

Here are four things to know about Ethereum's Shanghai upgrade and how it will impact the Ethereum ecosystem.

Shanghai is the final step in Ethereum's move from proof-of-work (PoW) to proof-of-stake (PoS) consensus mechanism. Proof-of-stake is considered a more energy-efficient way for verifying cryptocurrency transactions where validators are randomly selected based on the staked ETH as opposed to all validators competing to verify blocks first in proof-of-work.

Ethereum started as a PoW network but its PoS-based Beacon Chain, which ran along the live, PoW blockchain, was first launched in December 2020, and a merger between those two chains, known as The Merge, took place in September 2022.

While Ethereum users have been able to stake their ETH since the launch of the Beacon Chain, they have not been able to unstake their ETH. The Shanghai update changes that in the form of EIP-4895 and finalizes this transition to PoS.

The ability to unstake ETH and their associated staking rewards earned so far has some investors worried, as it could enable many users who were previously unable to sell their staked ETH to dump their