When looking to assess the state of the cryptocurrency industry, most crypto enthusiasts turn their attention to Bitcoin. As the first digital currency to be created and the most valuable by market cap, Bitcoin has become not only a household name but also a benchmark for the sector it represents, having a huge influence on all the other cryptos in the market. If the BTC price rises, so does the price of altcoins. Conversely, when BTC prices drop, altcoin prices follow suit. However, it’s not Bitcoin that has been making the headlines lately, but its greatest contender, Ethereum.
The second largest crypto in existence has always been popular with investors, establishing itself as a very profitable investment option due to its long-term appreciation and wide range of use cases. Nowadays, anyone can easily buy Ethereum with a debit card, credit card, bank transfer or other convenient payment methods, and add it to their investment portfolio. And yet it’s not the numerous applications nor the ease of access that have brought Ethereum into the spotlight in recent months but a series of upgrades that the network has undergone and their implications.
There are a lot of interesting things happening on the Ethereum front and the next big upgrade is just around the corner. So, let’s take a closer look at these recent and upcoming developments and see what they entail.
All eyes on Ethereum
While the cryptocurrency industry is in itself an innovative and forward-thinking environment, Ethereum has always been particularly focused on bringing groundbreaking developments onto the crypto scene and driving the sector forward. That’s one of the things that have helped Ethereum differentiate from other players in the market and establish itself as one of the most reputable cryptos in existence.
Ethereum’s emphasis on innovation is reflected by the numerous upgrades that have marked the network’s short history. While other crypto projects have made little to no effort to improve their technology, Ethereum’s developers continue to work hard behind the scenes and expand the platform’s capabilities and efficiency. Probably the biggest effort in this respect is represented by Ethereum’s most recent upgrade, the Merge.
Completed in September 2022, the Merge aimed at reducing the network’s carbon footprint, which had become a hot topic of debate, by switching from an energy-intensive proof-of-work (PoW) model to a proof-of-stake (PoS) consensus mechanism. That implied replacing miners with validators which saw the network cut back on energy consumption by 99%, thus becoming one of the most sustainable blockchain platforms to date.
Many analysts agreed that this would make the asset more appealing as an investment venue and potentially drive Ethereum prices up in the future. While it’s still early to gauge the effects that the Merge has had on the network or the industry as a whole, the upgrade was declared a success, which allowed developers to focus their attention on the next stages in Ethereum’s evolution, which we’re going to cover in the following section of the article.
One step closer to the Shanghai upgrade
In preparation for the Merge upgrade, over 17 million ETH have been deposited on Ethereum’s Beacon Chain launched in 2020 – a process known as staking which allows users to become validators. These assets have been locked on the network until now, so users were unable to access them. This means that a huge amount of capital has been kept out of circulation for quite a long period of time. However, the upcoming Shanghai upgrade is going to address the issue by unlocking staked ETH and allowing users to withdraw them.
However, as with any other update that has been rolled out so far, the Shanghai upgrade also requires preparation and testing before going live, and that’s exactly what developers are focusing on at the moment. Validators first got the chance to explore withdrawal functionalities on the Zhejiang testnet at the beginning of February, and now Sepolia is the second testnet to give users a glimpse into these features. This proves we’re inching closer to the implementation of the Shanghai upgrade which was scheduled to take place somewhere around the end of March and the beginning of April.
Ethereum employs testnets such as Goerli and Sepolia to fix issues in due time and make sure that upgrades are launched without a hitch. The news that Ethereum is using Sepolia as its second testnet for Shanghai comes right after developers announced they intend to remove their largest testnet, Goerli, from the equation and gradually transition to the Sepolia testnet. The change was deemed necessary due to the increasing costs of GETH, the asset that powers the Goerli testnet. However, the news should come as no surplice since according to one of Ethereum’s developers, testnets have a limited lifespan and their purpose is to serve for just a few years before being phased out and replaced with new ones.
Regardless of the testnets employed to simulate ETH withdrawals, the most important aspect to focus on is what will happen after this feature is finally rolled out and people will be able to unlock their assets. Although the Shanghai upgrade is less important and complex than the Merge, it will have numerous implications for those who have staked ETH and the network at large. Some believe that the upgrade will boost ETH liquidity since a considerable amount of assets will enter circulation, and that will have a direct impact on prices. Others worry that a large number of users pulling out their coins will destabilize the network and cause mayhem among investors.
It’s difficult to say if any of these scenarios is going to come true in the near future. Over the past few months, the price of Ethereum seemed to remain largely unaffected by the string of developments. The network’s resilience also serves as a guarantee that whatever the challenges may be, Ethereum will most likely preserve its dominance and influence in the crypto space.