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The Ethereum Shanghai upgrade event, also known as Ethereum 2.0, is a major upgrade to the Ethereum blockchain that aims to improve the network's scalability, security, and sustainability. The upgrade is divided into two phases, and the Shanghai phase is the second phase of the upgrade which took place in second quarter of 2023.
The Shanghai phase of Ethereum 2.0 aims to improve the network's scalability by introducing a new proof-of-stake consensus algorithm called "Beacon Chain". The Beacon Chain will act as a separate chain that will coordinate with the current Ethereum mainnet. The mainnet will continue to use the proof-of-work consensus algorithm, while the Beacon Chain will use proof-of-stake to validate transactions and create new blocks.
One of the main benefits of the proof-of-stake consensus algorithm is that it eliminates the need for miners to solve complex mathematical problems to validate transactions. Instead, users who hold Ethereum tokens can stake their tokens to validate transactions and create new blocks. This process is called "delegating" and it allows users to earn rewards in the form of Ethereum tokens.
The Shanghai upgrade also introduces a new mechanism called "Sharding", which allows the Ethereum network to split into smaller, more efficient blocks called "shards". This will allow the network to process more transactions per second and reduce the current congestion on the network.
Another key feature of the Shanghai upgrade was the implementation of "EIP-1559". EIP-1559 is a set of protocol upgrades that aims to improve the current Ethereum fee market by introducing a base fee that is burned when a transaction is included in a block. This will help to reduce the volatility of fees and make it more affordable for users to send transactions on the network.
The Shanghai upgrade also includes several other improvements such as better support for smart contracts, improved privacy features, and better support for decentralized finance (DeFi) applications.
The Shanghai upgrade is expected to have a significant impact on the Ethereum network. It is expected to improve the network's scalability, security, and sustainability, which will attract more developers and users to the network. It is also expected to reduce the current congestion on the network, which will make it faster and more affordable to send transactions on the network.
However, the upgrade also comes with some challenges. The proof-of-stake consensus algorithm is still relatively new and there are concerns about its security and stability. Additionally, the implementation of EIP-1559 has the potential to disrupt the current fee market and make it more difficult for users to predict the cost of sending transactions on the network.
Disappointments.
Ethereum upgrade (merge 2.0) didn't fulfill the expectations and has disappointments. As JPMorgan describes like ,
- The count of daily Ethereum transactions fallen by 13%.
- The active Ethereum addresses decreased by 21%.
- The assets in locked form on Ethereum also declined by 9%.
- Shift of (PoW) to (PoS) didn't worked as expected.
- Stacking volume increase by 48%.
- Protodanksharding could not regain the charm of Ethereum.
