The Ethereum Merge event, fervently discussed on September 15 last year, remains vivid in our memory. Following the transition to Proof-of-Stake (PoS), Ethereum’s price surged over 100%, climbing from a low of around $800 to nearly $2,000. Now, just a few months later, the highly anticipated Shanghai Upgrade is here.
Since shifting to PoS, Ethereum’s development pace has accelerated, injecting new energy into the prolonged crypto winter.
Why Is It Called the Shanghai Upgrade?
The previous major upgrade, known as the Paris Upgrade, was somewhat overshadowed by the widely recognized term "The Merge." Ethereum’s major upgrades are named after the cities hosting the annual Devcon developer conferences. Hence, the Shanghai Upgrade.
Back in 2020, at the Shanghai Blockchain Summit, Ethereum founder Vitalik Buterin emphasized that a public blockchain’s ecosystem is its killer feature. Today, Ethereum’s ecosystem stands as a behemoth in the crypto space.
As the leading Layer 1 blockchain, Ethereum continues to set the pace. Every major upgrade draws significant attention from ecosystem participants and investors alike.
Key Features of the Shanghai Upgrade
Beyond technical refinements and parameter adjustments, the most notable change in the Shanghai Upgrade is enabling withdrawals for ETH staked on the Beacon Chain. Staking initially launched in December 2020, allowing anyone with 32 ETH to participate. Over time, staking service providers emerged, enabling users with any amount of ETH to stake through these platforms.
Official Ethereum data shows over 16 million ETH is currently staked, with more than 500,000 validators. The current annual percentage yield (APY) hovers around 5.1%. While this may seem modest for fixed-term staking, the ability to withdraw freely could make it far more appealing.
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Compared to traditional bank savings rates, a 5.1% APY for a liquid stake is highly attractive. Post-Shanghai Upgrade, staked ETH becomes akin to a high-yield savings account.
It’s worth noting that staking rewards are dynamic. When the total staked amount was 790,000 ETH, the annual percentage rate (APR) reached 17.6%. As more ETH is staked, the yield gradually declines, stabilizing around 4.9% once 10 million ETH is staked.
Even at this rate, Ethereum staking offers substantially higher returns than most traditional finance options. This will likely encourage more holders to stake, boosting both network security and ETH’s value.
Currently, staked ETH represents about 13.91% of circulating supply. In comparison, most major PoS blockchains have staking rates exceeding 60%. Given Ethereum’s decentralization and maturity, a 50% increase—reaching a 20% staking rate—is achievable post-upgrade.
Such growth would benefit all staking participants and create opportunities for new entrants, fueling excitement around Ethereum’s staking ecosystem.
Will Withdrawals Lead to a Sell-Off?
A common concern is whether unlocking 16 million ETH could trigger massive selling pressure. However, several factors mitigate this risk.
First, withdrawal limits are in place to ensure a gradual release of ETH, preventing a sudden market flood.
Second, a significant portion (estimated at over 60%) of staked ETH is already liquid. For example, staking via Lido yields stETH, which can be freely traded on decentralized exchanges. Many validators without long-term commitment may have already exited.
Moreover, the appeal of high-yield, liquid staking may incentivize current stakeholders to retain or even increase their positions, while attracting new participants.
Major Players in Ethereum Staking
According to Dune Analytics, the 16 million staked ETH is distributed across five main categories: liquid staking pools (33.2%), centralized exchanges (28.4%), whales (19.7%), mining pools (13.6%), and others (5.1%).
Among these, liquid staking pools are receiving significant attention. While CEXs, mining pools, and whales offer fewer short-term opportunities, they remain relevant for medium to long-term strategies.
The top nine liquid staking providers by ETH volume include well-known names like Lido and Rocket Pool. Lido dominates with 4.7 million ETH staked, accounting for 87.42% of the liquid staking market. Rocket Pool, though smaller, has gained traction after being listed on Binance.
Liquid staking currently represents 33% of all staked ETH. Data trends indicate that as total staked ETH grows, liquid staking’s share increases steadily, while other sources remain relatively flat.
Post-Shanghai Upgrade, the combination of liquidity and attractive yields could drive explosive growth in this sector, inviting both existing and new players to compete.
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Frequently Asked Questions
What is the Shanghai Upgrade?
The Shanghai Upgrade is Ethereum’s latest major update, enabling withdrawals for staked ETH and introducing technical optimizations to enhance network performance.
Will unlocked ETH cause a price crash?
Unlikely. Withdrawal limits and the high incentive to restake mean most ETH will remain locked or be re-staked, minimizing sell pressure.
How does staking APY work?
APY is dynamic—it decreases as more ETH is staked but stabilizes around 4.9%. This offers a competitive return compared to traditional finance options.
Who are the main staking service providers?
Lido and Rocket Pool lead the liquid staking sector, while centralized exchanges like Coinbase and Binance also offer staking services.
What is liquid staking?
Liquid staking allows users to stake ETH and receive a tokenized representation (e.g., stETH) that can be traded or used in DeFi, providing liquidity while earning rewards.
Is staking safe?
Yes, when using reputable providers. However, risks include smart contract vulnerabilities and validator penalties, so due diligence is advised.