What exactly is the “Shanghai Upgrade” that is being talked about everywhere?

The world has been discussing Shanghai these days. Of course, it is talking about the Ethereum Shanghai upgrade. What does this upgrade have to do with Shanghai? Will it affect Shanghai's housing prices? (Shocked) No! It has nothing to do with Shanghai. The Shanghai upgrade is just the name of a version of the Ethereum technology upgrade. The origin of it is still V God's grand cosmic view, the metropolis series. There have also been London and Paris upgrades before.

So what exactly is this upgrade? What's so powerful about it? What impact does it have on us? Can you explain it in plain language? There are too many technical things to digest. It's a coincidence, the external mountain is a place where people speak in plain language. Listen to me.

What is

Ethereum is a public chain, and it needs to upgrade from eth 1.0 to eth 2.0. The Shanghai upgrade is an important upgrade in the eth 2.0 version. The main change in the upgrade is that the method of proof of stake has changed . 1.0 has machine mining , and mining is to help calculate transactions on the blockchain, called PoW (proof of work) . 2.0 can no longer use mining machines to mine eth , so it has been changed to PoS (proof of stake) . In layman's terms, I put something here to help prove the calculation on the blockchain.

In December 2020, a "beacon chain" was launched to prepare for this 2.0. Since then, ETH can be staked. On September 15 last year, ETH 2.0 was merged and upgraded to ETH 2.0 . Now our Ethereum public chain is PoS, because there is no machine mining, it is more energy-efficient. However, the staked ETH and the interest earned on the beacon chain cannot be withdrawn!

The most important thing about this Shanghai upgrade is that the ETH that was staked 2 years ago and the staking income can now be withdrawn!

What are the impacts?

1. Will the market crash?

I heard that nearly 16 million ETH have been pledged, and now that the pledged ETH can be withdrawn, won’t everyone sell it off and crash the market? No. First of all, you have to queue up to withdraw the ETH, and there is a daily limit. A maximum of 1,350 validators can withdraw every day, which is 43,000 ETH. This level can fluctuate, but it is not a crash. More importantly, ETH 2.0 provides a minimum apy of 4.8% (currently) of the pledged ETH. If someone withdraws, more people will come in immediately.

In fact, there is another reason. Hehe, everyone who pledged before suffered losses. It was very expensive to buy ETH at that time.

2. What are the benefits?

There are 2 types, pledge concept and L2.

The reason for staking is that after the Shanghai upgrade, the staking-deposit and withdrawal channels will be opened, and more people will be attracted to stake. According to the current staking rate (15%), it is still very low, such as Polygon (38%), Polkadot (44%), and BNB, which is as high as 97%. Therefore, there is still a lot of room for improvement.

10% of the profits from the staking service will go to the corresponding service provider. This part is a stable profit, so it is very beneficial to several staking service protocols, including LDO, SSV, and Swise.

The positive impact on L2 is actually an expectation. The Shanghai upgrade does not have any substantial positive impact on L2. However, the next key event after the Shanghai upgrade is EIP4484, which is expected to be released in the fall of this year. At that time, the cost of L2 is expected to be reduced by 10 times. Currently, among those with L2 tokens, OP is the top player.

How to participate

1. Pledge

There are many ways to stake ETH. The simplest way is to stake it on CEX, but you know, I don’t like CEX. So you can stake it on Lido. It takes 32 ETH to stake a node. It’s okay if we don’t have that much. We can use the Lido staking model, where everyone gathers together to form a node and share the money. Staking 1 ETH for 1 year can get about 0.044 ETH, which is indeed very low compared to the dozens or hundreds of apy of Ponzi schemes, but it is stable, so it is suitable for large capital operations.

If you know a little bit about technology and are good at tinkering, you can apply to be a node yourself, so that you can also receive the service fee yourself, and the income will be higher. What you pay is the machine, electricity bills, and losses caused by accidental network disconnection.

But please note that staking ETH means that the price of ETH against U may fall or rise , so it is equivalent to cash standard with leverage, do you understand?

2. xx

There is no secret about this anymore, and I don’t have any special suggestions. The positive factors have already given their identity cards, and each has its own advantages and disadvantages. LDO is too expensive, and it is very tiring to be the top brand, and the space is relatively small. SSV is about the same as air, with a small car, a good concept, and high institutional costs; SD and pSTAKE both have shortcomings. I am not good at short-term games, so I can only give you this analysis.

OP is the current top player in L2, but he won’t be the top player for long. Soon arb and zk will come. Before they issue their coins, let’s party like I will always be the number one.

3. Circular Staking

What is the difference between it and staking? It was created by DeFi people. After you pledge ETH to LDO, won’t ETH be unusable? They invented a way to play, that is, you pledge 1 ETH, and it will immediately give you a stETH as a voucher. The interesting thing is that you can immediately trade and pledge this voucher... So eth-seth-xx-xxx, a circular pledge is created. When the market is good, it can make up about 20% interest. Of course, the more nesting dolls, the higher the risk.

1ETH=1stETH, but the reverse is not so possible. This is what we mean by decoupling recently. I just checked and found that 1stETH can only be exchanged for 0.98738ETH.