Ethereum’s Shapella Upgrade Passes Final Testnet Deployment

The final dress rehearsal for Ethereum’s Shapella upgrade was executed on the Goerli test network on Tuesday, paving the way for staked ETH withdrawals to activate on mainnet.

The Goerli testnet was upgraded at around 10:25 pm UTC but initially suffered from low network participation, as less than two-thirds of validators had upgraded their software clients in time. But enough testnet validators updated their nodes following the update, and Shapella finalized at roughly midnight UTC on Wednesday.

Goerli users can now fully or partially withdraw staked Ether from the testnet’s Beacon Chain.

Mainnet Launch Looms

Tim Beiko of the Ethereum Foundation said low validator participation shouldn’t be an issue when the Shanghai and Capella upgrades deploy on Ethereum’s mainnet.

He attributed it to a lack of incentives to ensure testnet nodes are always up-to-date, adding that most validators dedicate most of their resources to operating mainnet nodes.

“One challenge with testnet validators is that given the ETH is worthless, there’s less incentive to run a validator/monitor it,” Beiko tweeted.

Shapella was previously executed on the Sepolia testnet on Feb. 28 and the Zhejiang testnet on Feb. 8.

Once deployed on Ethereum’s mainnet, Shapella will enable staked Ether withdrawals for the first time despite users being able to stake since the Proof of Stake Beacon Chain launched in December 2020.

Staking Adoption

Analysts are tipping that the activation of withdrawals will drive a sharp increase in staking adoption as users become free to enter and exit staking positions at any time.

Ethereum is already the largest Proof of Stake network by staked capitalization, with $31.9B or 15% of its supply locked up, according to Staking Rewards. For comparison, the average staking percentage for the top ten Proof of Stake networks, excluding Ethereum, is 53%.

Staking Rewards hosted a discussion yesterday examining institutional ETH staking post-Shanghai. The panel featured representatives of leading liquid staking derivatives protocols Lido, Rocket Pool, and StakeWise.

The panel concluded that the upcoming upgrade “massively de-risks staking for institutions,” predicting that investors will stake more than half of Ether’s supply within a few years.