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24th January 2023 > > Shanghai upgrade.

tl;dr

The Shanghai upgrade is on its way.


Market Snap







Market Wrap

Well, well, well. You all did good looking after cryptos during my brief absence. You can step down now, I will take responsibility again.


And some interesting news from the world of NFTs (non-fungible tokens). Though sales revenues were down from $25bn to $24bn as measured in fiat, sales volumes in units were up 67% in 2022.


This means that not only is the NFT space in robust health – a narrative you would be hard-pressed to read in most news outlets – but as crypto prices rally, the fiat denominated revenues increase too.


This is bound to upset some old-school centralists.


Occasional Series – Interregnum

Yes, thank you for asking, it was an amazing week of skiing with plenty of snow, sunshine, and frolics.


Curious Cryptos’ Commentary — Ethereum upgrade

The next upgrade to the Ethereum network, known as Shanghai, is slated for March 2023.


This will be the first major upgrade since The Merge last September, during which ETH transitioned from PoW (Proof-of-Work) to PoS (Proof-of-Stake).


You will recall that the CCC was the only commentator (it is usual I find myself with a contrarian view) to describe this as a sell the rumour, buy the fact event which it did indeed turn out to be. There are concerns this time around that Shanghai will have a negative impact on the price of ETH, so let’s try to broadly understand what is involved.


The scope of Shanghai has been reduced somewhat.


Out goes proto-danksharding which allegedly would result in much reduced, and much cheaper Layer 2 transaction times and prices.


Out goes EOF (End of file) which was to fundamentally restructure the EVM (Ethereum Virtual Machine) in a suite of five separate changes introduced as EIPs (Ethereum Improvement Proposals).


Finally, a technical adjustment to Shanghai has been rejected, but continues to claim significant support amongst a sub-section of the Ethereum development community. Apparently this dispute centres around the use of SSZ (simple serialisation) and RLP (recursive-length serialisation) both of which are encoding methods, the latter being used in Shanghai, to be replaced by the former in the future.


There is a body of opinion that this decision to stick with RLP will cause large and unknown problems further down the line. Well, I guess we must just wait and see on that one.


Essentially what we have left in the Shanghai update is the ability to remove staked ETH.


PoS consensus mechanisms require coins to be staked. Validators are chosen at random in proportion to their holdings to validate the next block, in return for the fees from that block.


For now, those who have staked directly either as individuals or in a pool have been unable to withdraw their staked ETH nor the rewards.


Those who used liquid staking products, one example of which is provided by Lido Finance in the form of stETH (staked ETH), had no such problems. Please see CCC dated 6th September 2022 Crypto staking part 6 for more details.


13mm ETH are currently staked worth over $20bn, approximately 10% of all ETH in circulation.

Some doom-mongers claim that on the day of Shanghai a great deal of ETH will become available for sale, thus exerting a downward pressure on prices.


What utter tosh.


43% of ETH that has been staked is in the liquid staking product of one form or another. That is already for sale if the owner wishes to do so.


Those ETH holders who happily tied up their ETH in non-liquid staking products are diamond hands. I suspect the most they would sell are the rewards claimed, but it is more likely those rewards are themselves staked.


If this negative narrative gains traction over the next two months or so, Shanghai will likely be a buy the rumour sell the news event.

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