Ethereum’s next stop: Shanghai upgrade

This Thursday, the Ethereum consensus mechanism transitioned from PoW to PoS, and the historic feat of "merger" that the Crypto community has been looking forward to for more than five years was finally successfully completed. Now, with the support of this great technical feat, the core developers of the Ethereum network began to think about another question: What is the next step for Ethereum?

In fact, developers are already setting their sights on the next upgrade: Shanghai .

Although the Ethereum core developers will not hold group meetings or make collective decisions on the future of the network in the next two to three weeks, the short break will not last long. Next month, they will need to collectively determine which features to include in Ethereum's next upgrade, Shanghai. It should be noted that digital assets worth tens of billions of dollars are now deployed on the Ethereum blockchain, so the first upgrade after the merger is particularly critical.

Micah Zoltu, a core developer of Ethereum, said that the community has many ideas for the "Shanghai" upgrade, but no consensus has been reached yet. One of the most urgent new features heard so far is to allow Ethereum validators to withdraw staked ETH.

The biggest change that the merger brings to the Ethereum blockchain is to change the network consensus mechanism to "proof of stake", that is, all transactions on the network will no longer be verified by energy-intensive "miners", but by individuals and organizations "validators" who have deposited or pledged a large amount of ETH . For validators, the ETH they stake can generate and collect new ETH, and these so-called "new ETH" are their rewards for proving that they have verified transactions and protected the network.

However, so far, Ethereum's staking mechanism can only deposit ETH, not withdraw ETH. According to the official Ethereum network data, the number of network validators has reached 427,326, and the total amount of staking has reached 14,451,487 ETH. According to the current ETH price, the total value of staking is close to US$22 billion, but all these ETH are now "trapped" on the Ethereum network unless developers add a withdrawal function.

It is understandable that in the Shanghai upgrade, almost all core developers will put the ETH withdrawal function of pledged first, otherwise the attractiveness of staking ETH will be greatly reduced, because people will find that their staked ETH cannot be withdrawn for a long time, which will inevitably weaken the "validator"'s motivation to pledge, and there will not be so many people entering the Ethereum network in the future, which will undoubtedly have a huge impact on the future development of Ethereum and network security.

Ethereum core developer Marius Van Der Wijden admitted that core developers may agree to solve the issue of staking ETH withdrawals in the next "Shanghai" upgrade, "This is almost a done deal ." However, it is not clear what else will be included in the "Shanghai" upgrade.

What’s next for Ethereum after staking?

Micah Zoltu believes that the biggest problem with the "Shanghai" upgrade now is that "everyone has a different list" and everyone thinks their proposal is "the most urgent", but these ideas are very subjective and there is no consensus.

Nevertheless, in addition to adding the ability to withdraw staked ETH, the Ethereum "Shanghai" upgrade may also include some other potential updates, such as:

1. Ethereum Virtual Machine (EVM) update . EVM is the underlying mechanism of Ethereum for developers, defining the management rules for how blocks on the network interact. Ethereum has not made any updates to EVM in the past two years, partly because of concerns that the update will cause trouble for merging. As Marius Van Der Wijden said, updating EVM before merging will increase the complexity of testing by 10 times and make upgrading more difficult.

2. Proto-danksharding update . The Proto-danksharding upgrade has been rumored for a long time and has aroused great interest in the Ethereum community. It is related to the Rollups scalability technology. Rollups is an Ethereum network expansion tool that aggregates a collection of transactions into a unit and then submits the unit to the Ethereum blockchain as an independent transaction, thus solving the problems of slow transaction processing speed and high gas fees on the Ethereum mainnet.

Proto-danksharding can be seen as a preliminary version of danksharding. During the Proto-danksharding process, only small block data needs to be sampled to verify a large amount of data on Rollups. In essence, this update should greatly improve the speed and convenience of verifying large amounts of data on Ethereum Layer 2 networks such as Optimism and Arbitrum.

Van Der Wijden added that Proto-danksharding can reduce the gas fees on the Rollup chain, and can also make it easier for Rollup to scale up on a large scale, while transaction costs will be greatly reduced. However, although danksharding is very attractive to Layer 2 users, and the upgrade can reduce gas fees and reduce transaction time, the development work requires a lot of effort and time.

The larger the feature set included in the Ethereum "Shanghai" upgrade, the more complex the upgrade will be, and more importantly, it will cause delays in the upgrade work .

Ethereum core developer Marius Van Der Wijden explained: “Some people only study the surface, and they even think that not all functions in the ‘Shanghai’ upgrade must be implemented and tested, but the problem is that if there are 10 changes in the ‘Shanghai’ upgrade, then each change needs to be tested separately, and it is also necessary to test how different changes interact and affect each other, which means that once the number of functions included in the ‘Shanghai’ upgrade increases, the testing workload will increase exponentially.”

As of now, Ethereum developers have not estimated how long it will take to implement the Shanghai upgrade, but Van Der Wijden believes that the Shanghai upgrade should take place within 2023. However, if Ethereum users and developers turn their attention to other updates, such as danksharding, the Shanghai upgrade date will be delayed.

Don’t forget that there is still more than $20 billion worth of staked ETH “trapped” in the Ethereum PoS chain.