June 19, 2024
Ethereum’s move to proof of stake

Ethereum developers have finally announced a target date for the long-awaited Shanghai hard fork, which comes after months of waiting since the Merge. This upgrade will allow stakers on the network to withdraw their locked Ether (ETH) for the first time since December 2020.

Target Date for Shapella Upgrade

During a recorded call amongst Ethereum’s core developers on Thursday, a target date of April 12th was set for the highly anticipated Shapella dual upgrade. Shapella is a combination of the words Shanghai and Capella, which refers to changes in Ethereum’s execution and consensus layer, respectively. Once the developers vote and confirm the upgrade via GitHub, the date will be set in stone, following a month’s delay from their initial target date of March 2023.

After several successful simulation upgrades across Ethereum’s testnets, including the Goerli testnet on Tuesday, there were only minor issues related to validators who were late to upgrade. According to Beiko, these problems are not expected to occur again on the mainnet.

Ethereum’s proof of stake in September

With Ethereum’s transition to proof of stake in September, ETH owners could earn a yield on their holdings, resulting in a 4% yield at the time of writing. The shift also rendered the network’s mining industry obsolete, leading related businesses to redirect their GPU processing power to other proof-of-work chains. As a result, Ethereum’s energy consumption has substantially reduced, setting it apart from Bitcoin, which often faces scrutiny for its energy footprint.

Presently, approximately 17.6 million ETH are locked within the network’s staking contract, equivalent to around 14.3% of the total supply. This creates a $29.4 billion economic security barrier against a potential 51% attack.

Did the Merge have an unfavorable outcome?

Although the Merge enabled Ethereum to avoid scrutiny from environmentally-conscious policymakers, it could have given market regulators a reason to tighten the reins on the cryptocurrency giant.

Recently, Letitia James, the Attorney General of New York, filed a lawsuit against KuCoin for allegedly listing securities on its platform, including ETH. James echoed the views of Gary Gensler, the Chairman of the Securities and Exchange Commission (SEC), stating that proof of stake has transformed ETH into a security-like asset.

James argued that “The shift to proof-of-stake significantly impacted the core functionality and incentives for owning ETH, because ETH holders now can profit merely by participating in staking,” in a legal document.