Shapella’s Mainnet Arrival Pushed to April, Stirring Up More Uncertainty

Most key details around Ethereum’s much looked-forward-to Shanghai upgrade have so far been confirmed, conceiving anticipatory emotions ahead of its eventual release. However, the specific date Shanghai-Capella (Shapella) upgrades to the mainnet, which is of most interest to followers and investors now more than ever, has been elusive. Notably, this is not the first upgrade whose final release network developers have put back in history, as was the case for the immediately preceding one, the Merge, last September.

 Latest updates on Shanghai-Capella arrival date

In Thursday’s Execution layer 156 meeting, a consensus was reached that the complete dress rehearsal of Goerli will occur on Mar 14. In line with the new timeline, the launch date of the much-anticipated upgrade, which will enable staked Ether (ETH) withdrawal, has been moved by at least two weeks from the earlier commitment of late March to “the first week of April” at the earliest. The deployment of the ETH client software for Goerli at around 10 PM UTC on the said date will allow for comprehensive testing of staked ETH withdrawals.

“We didn’t agree to a mainnet date explicitly, but assuming things go well on Goerli, we’d probably set a date on the next ACDE (Mar 16),” Tim Beiko, one of the devs and the project coordinator posted in a recap of the biweekly call.

The Ethereum development team, earlier on Feb 28, successfully finalized the deployment of Shapella to the Sepolia testnet environment at epoch 56832.Terence.eth, one of the devs associated with Arbitrum, confirmed the previous announcement, noting that validators of PoS client Prysm who had failed to upgrade their Geth versions, were offline, but this was only so temporarily. A total of 1,973 validators participated in the epoch, with an average balance of 795,759.89 ETH. There were no slashings, indicating they were compliant with the network’s ethos. Overall, all validators that were expected to participate but failed to do so meant a total of 7 blocks were missed within the 32 slots proposed in the epoch. 63 attestations were made, with no deposits, and the 47 withdrawals recorded amounted to 38.33 ETH.

The Sepolia testnet was designed to replicate withdrawals as would occur in Shanghai but in a closed testnet environment, meaning that only the Ethereum core developers ran the validators on this testnet – Sepolia is also the smallest of all three testnets in terms of the number of validators participating. Before the Ethereum mainnet can start processing staked Ether withdrawals, one more upgrade is planned on Ethereum’s Goerli testnet.

Goerli is up next before it takes a final bow

The success of the final rehearsal on Goerli is important to confirm that the staked ETH withdrawal experience will be smooth at launch as the testnet is the largest and closely resembles the mainnet.

“So, looks like Goerli testnet is getting upgraded to Shapella Epoch: 162304 Time: 3/14/2023, 10:25:36 PM UTC. See ya on the other side!” Terence.eth wrote.

In the past, developers have been running test upgrades three weeks apart. It was thus expected that the upcoming Goerli upgrade could follow similarly and the mainnet Shanghai upgrade’s timeline spill over into April. Following the Goerli launch, developers plan to deprecate the testnet, with future ones, including Sepolia preferred since they don’t have the same stalwarts to token distribution as the former.

Scroll debuts the Alpha Testnet for its zkEVM on Ethereum’s Goerli

Goerli has, nonetheless, continued proving its usefulness. Scroll, a native zkEVM layer two solution for Ethereum, announced on Feb 27 the new Alpha Testnet launch on Ethereum’s Goerli as the final stop before debuting on the mainnet. The Scroll team said the launch comes after two years of building a zkEVM environment that’s community-driven, structured for the long term, and adherent to Ethereum’s tenets.

Previously, Scroll’s team debuted the Pre-Alpha testnet for its zkEVM in August last year. Scroll says since then, more than 15,400,000 transactions have been processed, and 1,800,000 blocks proven. Additionally, over 641,000 batches have been submitted and finalized by the roll-up contract on the base layer.

More about the testnet environment

In the new zero-knowledge roll-up testnet deployed atop Ethereum, users can transfer tokens between Goerli and Scroll via a bridge based on the Hop Exchange UI. Other tools provided to make it easier for developers to test and experiment with Scroll’s zero-knowledge roll-up technology are a block explorer based on Scroll Alpha’s fork of Blockscout and a roll-up explorer too. Users can also view their layer one transaction on Ethereum’s official Goerli block explorers on Etherscan and Blockscout.

To get started with the Alpha testnet, users need to configure their wallets by adding the relevant configurations. They can then request test tokens in the Goerli network from any Ethereum Faucet app and transfer them to Scroll Alpha through the Bridge application. Once their wallets are loaded, users can transfer their tokens to other wallets on Scroll Alpha and view the status of their transactions on the various block explorers. Scroll said it remains committed to improving the performance of its zkEVM over the next few months while working with the community of open-source contributors to build a future where blockchains are even more fundamental.

Implications of the Shapella upgrade

Developers attempted to ensure the arrival of Shanghai without any major slowdowns by axing out other equally-needed improvements from the final release. Though the decision saw resistance from some, including core dev Micah Zoltu who argued that trade-offs to launch the update soon would come at the expense of the long-term health of the network. Another major compromise the developers agreed to was foregoing a two to four-week-long technical adjustment to the hard fork that could expose Ethereum to unnecessary technical debt in the future. Despite these bargains, the Shanghai update appears to be headed for a late release beyond even its initial schedule.

The withdrawal of the staked Ether (and yielded rewards) is the core component of Shanghai. So far, more than 17.47 million ETH (valued at around $27.5 billion) has been deposited into the Beacon Deposit contract since December 2020, when Ethereum staking began for those looking to become validators securing Ethereum. The current figure represents a staked ratio of about 14.25% of all the Ether supply.

Centralized trading platforms and other intermediary staking services have been crucial in facilitating the process, contributing while benefitting from the fees involved.

Market analysts indicated earlier this year that leading exchanges like Coinbase stood to do well out of their business in terms of revenue by filling in as enablers and providers of staking. This has equally been the case for liquid staking platforms, like Lido, which provides better yields and has, in turn, experienced collateral inrush.

Ethereum ecosystem adopts account standards

In a separate development this week, Ethereum announced the launch of smart accounts enabled by the ERC-4337 standard. Smart accounts, essentially made to foster mainstream adoption by addressing convenience and usability challenges launched at WalletCon. The feature will be support by other Ethereum scaling solutions, including Polygon and Avalanche. The proposal was drafted by a team of seven authors, among them Ethereum co-founder Vitalik Buterin and first tabled for discussion in September 2021.

The standard, which has been in development for the last two years, allows Ethereum wallets to be managed as programmable smart contracts allowing for set time-based spending limits and automated payments. The implementation also eliminates the need for relays required in previously existing solutions and could enable the retrieval of private keys by different mechanisms. Users setting up new wallets will no longer be obligated to manage the 12-word seed phrases to secure their accounts. Security of wallets under this standard can be implemented using biometrics or two-factor authentication.

Smart accounts on Ethereum represent the latest development around the concept, which has increasingly become popular in 2023. Payments giant Visa launched an automatic programmable payments system that leverages the same concept in December.

Ethereum price action

Prior to late Thursday’s market-wide slump, the price of Ethereum’s native token, Ether, indicated a growing indecisiveness among traders regarding the price direction after the Shapella release. The latest market price action shows that the ETH/USD pair is hovering around $1,568 after a two-week run between $1,600 and $1,700. Market commentators remarking on the price action of Ethereum (ETH) in the lead-up to the upgrade have shown a lack of conviction in a strong move on either side.

The multiple rejections in the path of the premier altcoin above the $1,600 boundary in both halves of February have left optimistic traders even less confident in anticipation of the upgrade. Neutral observers assess that a correction towards $1,250 is on the cards should traders assume an even more cautious approach as the market braces for the Ether supply that will be released into circulation after mainnet withdrawal.

Any potential short-term sell-off expected around the event has been delayed for at least a few weeks following the release date push back. Some analysts further contend such an outcome will arrive in an insignificant magnitude as the total Ether supply across exchanges has been shrinking since September 2022.

A decline from approximately 30% to 11% during this period is an indication of capital moving to the sidelines. The proponents reckon that this general theme of self-custody, which manifested greatly after the FTX exchange’s bankruptcy, implies that any probable sell-offs will be limited. Researchers from CryptoQuant share this view. A midweek update from the data analytics platform indicated that 60% of the staked ETH supply (approx. 10.3 million ETH) sits at a loss relative to current market prices hence a lack of incentive to dump on mainnet withdrawal arrival.

To learn more about Ethereum, check out our Investing in Ethereum guide.

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