- Ethereum validators are currently unable to withdraw their staked ETH or earned rewards, but the Shanghai upgrade willenable withdrawals.
- If the Shanghai upgrade were to happen today, 1,044,950 ETH would be on the move within a 4.4 day period.
- Ethereum network’s dress rehearsal – Zheijang testnet – goes live on Wednesday, simulating withdrawals ahead of the upgrade.
Ethereum withdrawals will be enabled with the Shanghai upgrade, for the first time since the launch of the Beacon chain staking contract in December 2020. This marks a key milestone for ETH holders as token unlock by validators could increase the volume of ETH on the move in the circulating supply.
Hypothetically, if ETH token unlock happened on February 1, a total of $1.5 billion worth of Ethereum tokens would be unlocked within a period of 4.4 days. This could influence the sentiment among market participants, therefore the token unlock and the Shanghai upgrade matter to ETH holders in the ecosystem.
Also read: Is this the bullish signal that Ethereum holders are waiting for?
Ethereum network’s dress rehearsal for token unlock, Zhejiang testnet goes live on Wednesday
Ethereum holders and crypto market participants are closely watching Ethereum’s Zhejiang public testnet that is set to go live at 10 AM EST on Wednesday. The testnet will help validators (nodes in Ethereum’s proof-of-stake system responsible for processing transactions) simulate withdrawals.
Hypothetically, if Ethereum withdrawals were enabled today, approximately 1 million ETH tokens worth $1.5 billion would be automatically withdrawn within the next 5 days. This is just the tip of the iceberg when one considers the total volume of ETH tokens staked in the Beacon chain contract. 16.3 million ETH is currently staked on the deposit contract.
The following chart shows the partial and full withdrawals if Shanghai upgrade was to occur on February 1.
Partial and full ETH withdrawals if Shanghai upgrade’s token unlock occurs on February 1
The upcoming token unlock event is a key milestone for ETH holders as validators in the network have not been able to withdraw their staked or earned rewards since 2020. The upgrade is set to occur in March/ April 2023 and it has been referred to as Shanghai/ Capella.
Shanghai is the name for the Execution Layer (underlying ETH Blockchain) and Capella represents the Consensus Layer (Proof-of-Stake consensus mechanism on the Ethereum blockchain).
Both Shanghai and Capella upgrades will occur simultaneously and enable partial/ full withdrawals for Ethereum’s validators. Interestingly, all Ethereum withdrawals will be gasless and won’t represent transactions on the blockchain. Partial/ full withdrawal will be represented as a gasless state change on the Ethereum blockchain. State changes from staked to unstaked and so on.
How long will Ethereum withdrawals take after Shanghai and Capella upgrades?
The withdrawal process may take days, weeks or months depending on the number of validators that want to exit. To understand this better, let’s consider that 25% of the current validators on the Ethereum blockchain want to exit in one day, withdrawals would take 82 days to complete. The withdrawal time includes time spent in the exit queue and the waiting period.
If 25% validators wanted to exit
The withdrawn Ethereum tokens would enter circulation and this opens up an opportunity for liquid staking dApps like Lido that allow users to stake their ETH and use stETH across the DeFi ecosystem while earning staking rewards. ETH market participants and liquid staking dApps are therefore closely watching the Zhejiang testnet for a smooth rollout of the Shanghai upgrade.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
Crypto Today: BNB, OKB, BGB tokens rally as BTC, Shiba Inu and Chainlink lead market rebound
Cryptocurrencies sector rose by 0.13% in early European trading on Friday, adding $352 million in aggregate valuation. With BNB, OKB and BGB attracting demand amid intense market volatility, the exchange-based native tokens sector added $1.9 billion.
US SEC may declare XRP a 'commodity' as Ripple settlement talks begins
The US SEC is considering declaring XRP as a commodity in the ongoing settlement talks with Ripple Labs. FOX News reports suggest Ethereum's regulatory status remains a key reference for XRP’s litigation verdict.
Cardano Price Prediction: ADA could hit $0.50 despite high probability of US Fed rate pause
Cardano price stabilized above $0.70 after posting another 5% decline in its 3rd consecutive losing day. Multiple ADA derivatives trading signals are leaning bullish, but the US trade war impact outweighs the positive shift in inflation indices.
Stablecoin regulatory bill receives green light during Banking Committee hearing
The US Senate Banking Committee voted on Thursday to advance the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act, which aims to establish proper regulations for stablecoin payments in the country.
Bitcoin: BTC at risk of $75,000 reversal as Trump’s trade war overshadows US easing inflation
Bitcoin price remained constrained within a tight 8% channel between $76,000 and $84,472 this week. With conflicting market catalysts preventing prolonged directional swings, here are key factors that moved BTC prices this week, as well as key indicators to watch in the weeks ahead.
The Best brokers to trade EUR/USD
SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.