Ether Staked Volume Surpasses Withdrawals After Shanghai Upgrade
The Shanghai upgrade, also known as Shapella, was a major milestone for Ethereum that enabled staking withdrawals for the first time. Staking is a process where users lock up their ether (ETH) to secure and validate transactions on the blockchain, earning rewards in return. Before the upgrade, users could not withdraw their staked ETH, which amounted to over $31 billion worth of ether locked in the staking contract since December 2020.
However, after the upgrade went live on April 12, 2023, users were able to queue up their withdrawal requests and access their staked ETH. This raised some concerns that a large amount of ETH would flood the market and cause a price drop. But contrary to these fears, the amount of ETH being withdrawn was much lower than expected. In fact, more ETH was being staked than withdrawn in the days following the upgrade.
Why did staking withdrawals not affect ETH price?
There are several possible reasons why staking withdrawals did not have a negative impact on ETH price. One is that the withdrawal process is not instant, but rather takes several days to complete. Users have to wait for at least 27 hours after submitting their withdrawal request before they can receive their ETH. This creates a lag between supply and demand, and also gives users time to reconsider their decision.
Another reason is that many users who staked their ETH are long-term holders who believe in the future of Ethereum and its transition to proof-of-stake (PoS). PoS is a more energy-efficient and scalable consensus mechanism that will make Ethereum faster and cheaper to use. By staking their ETH, users are supporting this transition and earning rewards along the way. Therefore, they may not want to sell their ETH even if they can withdraw it.
A third reason is that ETH price has been on an upward trend since the upgrade, reaching over $2,000 for the first time since August 2022. This may have encouraged more users to stake their ETH rather than sell it, as they expect higher returns in the future. Moreover, some users may have used their withdrawn ETH to buy more ETH at a lower price and stake it again, creating a positive feedback loop.
What are the benefits of staking withdrawals?
Staking withdrawals are beneficial for both users and the Ethereum network. For users, staking withdrawals provide more flexibility and liquidity for their funds. Users can now access their staked ETH whenever they want, without having to wait for the full launch of Ethereum 2.0, which may take years. Users can also use their withdrawn ETH for other purposes, such as trading, investing, or spending.
For the Ethereum network, staking withdrawals increase its security and decentralization. By allowing users to withdraw their staked ETH, the network reduces the risk of centralization and censorship by large validators or exchanges. It also incentivizes more users to participate in staking, as they can now enjoy both the rewards and the liquidity of their funds. This will increase the amount of ETH being staked and thus improve the network's resilience against attacks.
How to stake or withdraw ETH?
To stake or withdraw ETH, users need to use a compatible wallet or platform that supports staking on Ethereum 2.0. Some of the popular options include Lido , Rocket Pool , Coinbase , Kraken , Binance , and StakeWise . Each option has its own advantages and disadvantages, such as fees, rewards, risks, and features. Users should do their own research before choosing a staking option.
To stake ETH, users need to deposit at least 32 ETH into the staking contract using their chosen option. They will then start earning rewards based on the network's performance and inflation rate. The current annual percentage yield (APY) for staking ETH is around 6%, but it may vary over time.
To withdraw ETH, users need to submit a withdrawal request using their chosen option. They will then have to wait for at least 27 hours before they can receive their ETH in their wallet. The withdrawal request can be canceled at any time before it is processed.
The Bottom Line
The Shanghai upgrade was a successful event for Ethereum that enabled staking withdrawals for the first time. Contrary to some fears, staking withdrawals did not affect ETH price negatively, but rather positively. More ETH was being staked than withdrawn, and ETH price reached over $2,000 for the first time since August 2022. Staking withdrawals are beneficial for both users and the Ethereum network, as they provide more flexibility, liquidity, security, and decentralization. To stake or withdraw ETH, users need to use a compatible wallet or platform that supports staking on Ethereum 2.0.
Are you interested in staking or withdrawing your ETH? Do you think staking withdrawals will have a long-term impact on ETH price and adoption? Let us know your thoughts in the comments below! 😊