About Ethereum (ETH)
Ethereum (ETH) is the second-largest cryptocurrency token in terms of market capitalization. This can be attributed to how it has brought much innovation and many use cases to the industry by introducing smart contract functionality, which has paved the way for decentralized finance (DeFi) and decentralized apps (DApps).
Ethereum allows users to build and deploy software, commonly in the form of DApps, which are then powered by a global distributed network of computers running Ethereum. The network is decentralized, making it highly resistant to any form of censorship or downtime.
In addition, Ethereum is an open-source blockchain platform that runs on the usage of its native currency, called Ether or ETH. All network transaction fees, or gas fees, are paid in ETH. ETH specifically used by the Ethereum blockchain to pay for transactions, and is responsible for powering just about everything that occurs on the network.
The Ethereum network can be used by anybody to create and run smart contracts, which are software programs that run autonomously, without user intervention. Ethereum’s growth can be attributed in part to its smart contract capability, which has enabled a growing ecosystem of DApps, non-fungible tokens (NFTs) and more.
By default, Ethereum uses a proof-of-work (PoW) consensus mechanism, but the network is slowly migrating to a proof-of-stake (PoS) as part of its Ethereum upgrade. The upgrade started in December 2020 with the launch of the Beacon Chain, and was supported by the Ethereum community through its staking of 1 million ETH in the first week alone.
What is Ethereum's Shanghai Upgrade?
Ethereum completed its switch from a PoW to a PoS consensus mechanism in September 2022. In a PoS consensus mechanism, users can stake 32 ETH to validate transactions rather than solving computational puzzles using mining equipment, making the process more energy-efficient.
After the Merge, the Ethereum Mainnet combined with the PoS Beacon Chain, and users weren't allowed to pull their staked ETH tokens. The main focus of the Shanghai fork is implementing EIP-4895, a change that allows validators to withdraw their locked Ethereum.
What is the Release Date of the Ethereum Shanghai Upgrade?
The Shanghai upgrade is the first hard fork for Ethereum since the Merge in September. The Merge switched the network from the energy-intensive PoW to the more energy-efficient PoS consensus mechanism.
Ethereum developers' shared that the Sepolia test network was scheduled to go through the Shanghai update in February. It will be followed by the Goerli Testnet, which will be the final test launch before the Mainnet launch in early April 2023. In addition to conducting tests for Shanghai, developers are also getting ready for EIP-4844.
What is EIP-4844?
The upcoming upgrade of Ethereum, referred to as EIP-4844 or proto-danksharding, is intended to decrease fees and increase transaction throughput. This will be achieved by implementing a new transaction type that can handle "blobs" of data.
Despite previous upgrades like The Merge and rollups, which have successfully boosted the blockchain's transaction throughput and reduced transaction costs, Ethereum continues to grapple with high gas fees. While data sharing is seen as a viable long-term solution, it is a complicated process, and therefore, EIP-4844 is being proposed as an interim solution.
EIP-4844 is regarded as a significant upgrade that will improve the network's capabilities by cutting costs and enabling quicker transactions.
What Improvements Are Part of the Shanghai Hard Fork?
Although EIP-4895 (allowing validators to withdraw staked tokens) is the highlight of the Shanghai fork, Ethereum's next upgrade will feature several other smaller EIPs (Ethereum Improvement Proposals).
One of the key benefits of the Shanghai Upgrade is that it will increase the gas limit for Ethereum blocks, allowing for more transactions to be processed per block. This will result in shorter transaction times and reduced congestion on the network, making it easier for users to transact and interact with DApps.
Other EIPs have also been introduced in Ethereum's upgrade:
EIP-3651 aims to decrease the gas cost for accessing the "COINBASE" address, a software utilized by validators and block builders.
EIP-3855 introduces "Push0," a code that will decrease gas costs.
EIP-3860 imposes a limit on the gas cost developers have to pay when working with 'initcode' (a code used for smart contracts).
EIP-6049 will inform developers of the deprecation of "SELFDESTRUCT," another measure to lower gas fees.