What is the Ethereum Shanghai Upgrade?

Ethereum is one of the most popular and widely used blockchain platforms in the world. The platform allows developers to build decentralized applications (dApps) and smart contracts, which are self-executing contracts that can automate various aspects of business and financial transactions.

However, as the platform grows in popularity, it also faces various technical challenges, such as scalability and security. To address these challenges, the Ethereum community is constantly working on upgrades and improvements to the platform. One such upgrade is the Ethereum Shanghai Upgrade, which went live in March 2023.

What is the Ethereum Shanghai Upgrade?

The Ethereum Shanghai Upgrade is a major upgrade to the Ethereum platform that aims to address some of the technical challenges facing the platform. The upgrade includes several improvements, including improvements to the gas fee structure. The upgrade will also introduce several new features, including the ability to execute multiple transactions simultaneously. The ethereum shanghai upgrade should help to improve the overall speed and efficiency of the platform.

How will the Ethereum Shanghai Upgrade affect me?

As an Ethereum investor, the Ethereum Shanghai Upgrade is likely to have a significant impact on you.

The upgrade will introduce some changes to the gas fee structure, which could affect the cost of using the Ethereum network. Gas fees are paid by users to compensate miners for validating transactions on the network. The changes to the gas fee structure are expected to make the network more efficient. But, they could also result in higher gas fees for certain types of transactions.

Most importantly, the Ethereum Shanghai Upgrade will introduce enhanced staking functionality. This means that users will now be able to withdraw their staked coins, which will make staking a lot more flexible for investors. Being able to withdraw staked coins will also make the interest rate market on Ethereum a lot more liquid and functional.

What Is Ethereum Staking?

With Ethereum’s switch to Proof of Stake, users can stake their ETH as part of the network’s consensus mechanism. Although users must lock 32 ETH to run creator validator nodes that help secure the network and validate transactions, many staking pools exist to facilitate the ability of users to stake fractions of 32 ETH. Wealthsimple, the Canadian fintech company, offers a ETH staking pool. Click here to sign up for Wealthsimple and learn more.

ETH validators receive new coins as a reward for validating transactions on the blockchain. With the Shanghai upgrade, stakers will now be able to withdraw their locked ETH used for validation. Previously, this feature wasn’t available after the Beacon Chain’s launch in December 2020.

Since the Merge, which saw the Ethereum mainnet combine with the PoS Beacon Chain, users haven’t been able to remove their staked funds. The Shanghai update (EIP-4895) resolves this issue and adds withdrawal functionality. On January 5, 2023, Ethereum developers agreed to a March 2023 launch date for implementing the upgrade as a network hard fork.

How might wealthy investors use blockchains in their portfolio?

Following the Shanghai Upgrade being made to the Ethereum blockchain, some wealthy investors are re-considering adding blockchain investments to their portfolio. But before doing so, they should keep in mind that blockchain investments are much riskier than traditional investments. Additional risks are both technical and legal.

An advantage of blockchain investments is their potential for diversification. Cryptocurrencies are not correlated with traditional investments like stocks and bonds, so they can help to reduce overall portfolio risk. They may be most comparable to other types of money such as gold when we compare their attributes as money. Cryptocurrencies are also portable in a way that money such as Canadian dollars and gold is not. Users can access cryptocurrency anywhere in the world so long as they have the software connections required.

How should wealthy investors hold cryptocurrencies?

Investing in cryptocurrencies directly can be risky for investors who aren’t technically savvy. To reduce this risk, most investors use custodians to hold their blockchain investments. Most commonly in the form of hosted wallets and ETFs.

Click here to read our post about holding cryptocurrencies.

Click here to read our post about crypto covered call ETFs.

Another way for investors to gain access to the benefits of Ethereum staking without taking on the technical risks directly is to invest in a company like Ether Capital. This company is traded on the NEO exchange in Canada with symbol ETHC and is focused on staking and the financial infrastructure that supports the Ethereum ecosystem.

Additionally, investors may want to consider Wealthsimple as a viable way to hold their cryptocurrency.

Wealthsimple ETH Staking

Certain wealthy investors with large amounts at risk may want to only consider certain types of custodians for their assets, including cryptocurrencies. This means sticking with custodians such as banks and insurance companies that are considered “too big to fail”. In Canada, this means RBC, TD, CIBC, BMO, Scotia, Manulife, and Sunlife.

Some Canadian investors might also feel comfortable with Power Corp which owns Canada Life, Wealthsimple among other companies. Power Corp has a low risk of failure, but it may not be systemically critical the way the big banks are. Also, the company is controlled by a single family through a multiple voting share structure even though Power Corp is still publicly traded. This ownership structure may make it less secure in certain circumstances.

But since Power Corp is a large public company with a long history, investors may want to use Wealthsimple to hold their cryptocurrencies along with ETFs. The benefit of Wealthsimple compared to ETFs is that investors can transfer cryptocurrencies such as bitcoin and Ethereum directly onto the platform compared to ETFs which are units traded on the TSX. Each has its own pros and cons.

Click here to use Wealthsimple to stake Ethereum.

Conclusion

The Ethereum Shanghai Upgrade is a major upgrade to the Ethereum platform that aims to address some of the technical challenges facing the platform. The upgrade includes several improvements, including improvements to the gas fee structure and enhanced staking functionality. As an Ethereum investor, the upgrade is likely to have a significant impact on you, especially with the added flexibility and liquidity of staking. While investing in cryptocurrencies directly can be risky, there are ways to reduce this risk, such as using custodians like Wealthsimple or investing in companies like Ether Capital. Overall, with the ongoing advancements in the blockchain technology, wealthy investors may want to consider adding blockchain investments to their portfolio to diversify and reduce overall portfolio risk.