Ethereum Shanghai Upgrade April 12th

Ah, I remember when I used to be pretty bullish on ETH.

Those were the days.

• ICOs everywhere.
• Cheap fees.
• The sky at our fingertips.

But then... something happened.

Hm yeah I pretty much ragequit ETH when operations were costing upwards of $200. What a joke. Clearly the network that was built to do anything and everything wasn't going to scale. EVM fractured. Dozens of EVM networks were cloned, each more centralized than the last. Many of us used these clones because they operated exactly like ETH on the frontend and the fees were 99% cheaper.

And then there were other reasons to abandon the ETH network as well. One of the oldest and most successful ERC-20 tokens (MAKER) decided it would be a great idea to allow USDC to collateralize DAI. DAI is supposed to be a decentralized stable coin, but then it was allowed for a centralized stable coin to collateralize it. We all saw how that turned out just recently. USDC breaks the peg: so does DAI. Not good (unless you are minting DAI and dumping it and hoping for a collapse to buy it back on the cheap).

There are many reasons to be bullish on crypto right now.

• Tax season will end soon.
• The entire banking sector is struggle bus.
• Bitcoin's doubling curve towers at $60k+
• The FTX contagion has passed.
• We've already suffered the standard year-long bear market.
• SEC has a significant chance of losing the Ripple lawsuit.
• The CBDC threat is overblown and largely misunderstood.
• Devs are grinding harder than ever across the board.

I talked a lot about these happenstances yesterday but one thing I forgot about was the Shanghai upgrade for Ethereum coming out next month.

What is Shanghai?

As far as I can tell this is going to be a very basic and small upgrade.
All anyone is saying about it is that ETH will be allowed to be removed from the staking timelock that allows users to wield governance powers over the network. Can you imagine that? What if there was a period in time when Hive couldn't be unlocked for six months straight? What a disaster that would be... and yet I don't see Ethereum users really complaining at all about it. It's Bitcoin maximalists talking all the trash, which is pretty funny.

Insecure much?

Hilarious.

You know what else is funny?

Why would they name it "Shanghai"? The literal definition of the word is to kidnap, hold hostage, and potentially enslave (or simply to deceive in many lesser cases). lol! What a terrible name! Shouldn't the upgrade be called Jailbreak or something like that? Wow, learn to brand ETH devs. Terrible terrible name. Just awful. I came up with an infinitely better name in five seconds. Do better.

But it doesn't really matter what it's called... it matters what it does. There are speculators on both sides of the aisle here. Bitcoin maximalists and other ETH skeptics believe that once stakers are allowed to withdraw this will create somewhat of a bankrun on ETH and crash the price as validators exit the system.

On the other side of this coin are the people who believe that being allowed to withdraw from the system is the ultimate completion of the POS migration. It makes the platform whole. Big money players will be far more willing to stake their ETH knowing that they can actually pull it out when they want to. The number of people entering the system will far outweigh those who want to exit given this speculation model.

There is approximately 16 million staked ETH that will be available for withdrawal by validators once the Shanghai Upgrade goes live. However, there will be a waiting time for validators to access the ETH they wish to unstake, since there is only a single queue for both full and partial withdrawals on the blockchain. In each slot (which occurs every 12 seconds), only 16 partial withdrawals can take place.

Hm?

Looks like only 16 people can unstake ETH every block. Assuming 15 second blocks that's 92,160 unstakes per day maximum. So there may be a bit of a queue to unstake if we assume that millions of people are going to want out on day one (which I'm now realizing is mathematically impossible during my proofread considering users need 32 ETH minimum to stake). We'll have to wait and see for the upgrade to go through before reporting on this further.

The context and the wording used is unclear. If only 16 "partial withdrawals" can happen every "slot"... what about full withdrawals? Is there a single queue for full and a single queue for partial, or just one queue for all of them? This article is terribly written lol (but leaning toward one queue for both). Something to consider going forward in April.

Given this data...

We can probably assume that the queue to exit will in fact be smaller than the queue to enter. I used to think, like the Bitcoin Maxis, that ETH would be doomed to crash when users could unstake, but I've since flipped the other way after considering all sides. Still, I have no intention of getting my ETH bag back. I'm over it. Bitcoin and Hive related stuff only IMO. With a sprinkle of Rune and XMR.

ETH still has big obstacles to overcome.

The regulators are breathing down their necks, and by all accounts the banking sector will want to buy out the network. One money attack later and ETH will easily have a higher market cap than Bitcoin, which will obviously be hilarious if and when that happens. Higher cap doesn't always mean bullish, friends.

Another thing to consider are the operational costs. Fees on ETH are still way higher than Bitcoin... even with the whole Bitcoin Ordinals debacle and NFTs being put directly onto the BTC blockchain. ETH's switch to POS may have "saved energy", but it puts the power of governance in the stakeholders hands, and the stakeholders are grossly centralized. Centralization leads to regulation and inevitable capture, as we all well know.

Let's be honest: high fees on a general purpose blockchain are never going to come down. When the layer one can do anything and everything, there is no way to scale that model. This is why I constantly harp on the idea that ETH is simply an incubation platform for EVM devs to bootstrap their ideas with a strong community and strong interconnected liquidity pools.

Projects within the incubation chamber that actually have success will inevitably be forced to leave the ecosystem and boot up their own EVM chain with the new underlying token being used for gas instead of ETH. We've already seen the template for this play out multiple times. No reason to think it will stop.

Conclusion

Add Shanghai to the seemingly never-ending list of potentially bullish events for crypto in the near future. Yes, ETH isn't perfect, but then again nothing is. The nature of decentralization is a balance between efficiency and trust. I hope ETH will find that balance, but I wouldn't count on it without some major hardship going forward. Hive has already survived its hostile takeover moment. I won't go through that again if I can avoid it.

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