Ethereum’s highly anticipated Shapella upgrade, which includes the “Shanghai” (execution layer) and “Capella” (consensus layer) updates, aims to boost Ethereum network stability by opening opportunities for liquidity, safeguarding validator fluctuations, and increasing ETH token circulation.
A lot has been said about this upgrade, so we’re going to focus in particular on how the upgrade plans to maintain network stability and perhaps curb selling pressure. Here is a summary of those measures.
- There are two withdrawal address variants: 0x01 (ETH1) and 0x00 (ETH2). Validators need a 0x01 withdrawal address to withdraw their stake, but around 58% of Ethereum validators currently have the 0x00 format. The Shapella upgrade will enable the address switch at a rate of 16 per block, taking three days for all 0x00 addresses to become withdrawal-eligible, given the user initiates the address change. This alone contributes greatly to stability.
- The partial withdrawal limit of 57,600 per day prevents a sudden surge in liquid ETH supply, allowing approximately 10 days for all validators to withdraw their excess balance (above 32 ETH), thereby preserving market stability. Partial withdrawals occur automatically for validators with 0x01 withdrawal credentials.
- The exit queue and withdrawal period safeguard network security by controlling validator fluctuations. With an estimated 530,000 validators, a maximum of eight can exit per epoch. If 10% of validators choose to unstake simultaneously, they would experience a 16-day average wait in the queue, helping to avert drastic market liquidity shifts and maintain stability.
- The unlocking of staked ETH will remove uncertainties and eliminate previous barriers of entry for liquid staking participants like stETH and rETH, substantially enhancing market liquidity and the circulation of ETH tokens, facilitating the growth of the liquid staking market.