What can Shanghai, one of the major upgrades in the Ethereum network, achieve or cause problems?
Ethereum, which is the second largest crypto project in terms of market value, has taken its place on the agenda with various updates since its emergence in 2015.
Ethereum, which has passed protocol updates such as Byzantium, Constantinople, Istanbul, Bellatrix, Merge, is going to the Shanghai update next week. So, after this update, what kind of results await us in Ethereum?
What Happened in Previous Updates on Ethereum?
The decentralized smart contracts platform Ethereum (ETH) continues to attract great attention with its dominance in the sector where Bitcoin is located. The popular cryptocurrency project also has the potential to drive crypto with various network upgrades and protocol updates.
2015 – Frontier
Officially released between July 22 and September 02, 2014, Ethereum went to another dimension with the Frontier fork in 2015. Frontier enabled Ethereum miners to start operations. But Frontier has brought another cryptocurrency with it. As a result of this fork, Ethereum Classic appeared on July 30, 2015. Remaining in the original network structure of Ethereum, Ethereum Classic stands out for preserving the unaltered history of the project. Also, Ethereum Classic is following the footsteps of Bitcoin with its limited supply.
The emergence of this project as a result of the fork made us think that Ethereum would fail and the masses would now shift to Ethereum Classic. However, the crypto market could not help but be stunned by the success of Ethereum.
At that time, a report by Aljazeera stated that Ethereum was the most ambitious successor to Bitcoin. This title seems to hold up to this day.
Frontier stands out as the leading fork in the expansion of Ethereum to the wider ecosystem. After this fork, ETH experienced a strong rise and built a throne in the crypto market that it will continue for many years. ETH. This bifurcation, which enabled the trade to progress in a stable and developing manner, enabled the project to be carried one step further.
2016 – Homestead
Wanting to make the future of the Ethereum network more specific, the Homestead fork revealed several protocol changes. This fork included a network change that gave Ethereum more network upgrades. This feature serves as a backdrop for today’s Shanghai-Capella.
While the Homestead fork paved the way for hardfork changes in the Ethereum network, it also included EVM updates. The impact of this fork on Ethereum was not limited to the network side. The price of ETH had increased by about 110 percent in the 1-month tranche with the effect of the bifurcation.
However, after the fork, ETH price experienced a strong decline from the $13 levels to around $8.3. Although no cryptocurrencies emerged as a result of the fork, the need for further development of the network could not be eliminated.
2017 – Byzantium
Byzantium, which is perhaps one of the most important network updates of Ethereum, had a great share in the success of the project to this day. With the Bizant fork, on the Ethereum network, block mining rewards were reduced from 5 ETH to 3 ETH. Also, this update added certain cryptography methods to allow Layer-2 scaling.
The Fork of Byzantium, which took place on October 16, 2017, opened the door not only to the development of the network, but also to the rise of the project’s cryptocurrency. ETH, which was at the level of 334 dollars during the fork, managed to rise to 1.296 dollars within 3 months with the effect of these updates.
Byzantium, which provides more efficient, more scalable and more active use of the network, contributed to the more active progress of the project in the short term. Ethereum maximalists were happy at the time due to the intense interest in the project and the rise in the ETH price.
Updates and Forks Take Ethereum Network One Step Ahead
Updates and forks in Ethereum took the project one step further. Looking specifically at Byzantium, it was observed that the Ethereum network saw more demand and the ETH price rose to four-digit levels. The subsequent Istanbul and Merge updates were also productive for Ethereum. However, Ethereum’s fork was successfully accomplished by Merge, which led to the emergence of a new cryptocurrency by forking.
After the merge, Ethereum left the Proof of Work (PoW) model and switched to the Proof of Stake (PoS) model. In what was seen as a sensational move, the termination of Ethereum mining has received intense criticism in this network change. With this fork, Ethereum PoW, which emerged to continue the PoW structure, became the new active stop of miners.
With this fork in Ethereum, everything had come to a different level. Ethereum now charged less gas fee, had more transactions, and was on its way to becoming deflationary. However, the popular project could not figure out its scaling solutions. Although Merge is seen as a life-saving update, it also opened the door to future updates. With this update, the project managed to reduce its supply by recording a new milestone.
Ethereum at Crossroads: Shanghai-Capella
A new crossroads and a new network fork for Ethereum will occur on April 12, 2023. This bifurcation was named Shanghai-Capella. The fork, which includes two different network upgrades, will take place on April 12, 2023 at 01:27.
This update brings staking withdrawals to the execution layer. With the Capella upgrade, this service will make it easier for blocks to accept withdrawals as well. ETH staked will be allowed to be withdrawn to the execution layer.
This transaction has the potential to facilitate more network activity on the Ethereum side, earning more fees, and making Ethereum truly deflationary.
It is possible to observe two different crossroads with Shanghai-Capella. One of these crossroads could be the emergence of a new Ethereum coin. As a result of the fork, it is not surprising that a cryptocurrency such as Ethereum PoW and Ethereum Classic emerged. The possible cryptocurrency is coming out with the aim of continuing its previous features. However, Shanghai and Capella are not as big an influence as Merge. Shanghai-Capella, which is mostly protocol updates, leaves two different scenarios in front of the project. These scenarios are;
- 1- 32.5 billion dollars of staked ETH enters circulation and ETHs removed from stake prevent updating… As a result of this situation, problems may occur in Ethereum in the short term. Experiencing dips and network activity losses could turn Ethereum back into an inflationary model.
- 2- Not using the staked ETHs actively and can make the Ethereum network more active with the update. Shanghai-Capella has the ability to take Ethereum one step further against Bitcoin if used at the right time and in the right situation.
As a result of this update, if Shanghai-Capella is successful, there may be some revival in the crypto ecosystem. In the development of the crypto ecosystem, when we consider the market dominance of Ethereum, it is on the table to empower altcoins. However, it has been one of the topics discussed by the crypto ecosystem that if Shanghai-Capella fails, there may be a strong drop in Ethereum.
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