## Ethereum Stakers Welcome Liberation - The True Meaning of the Shanghai Upgrade

**Abstract** Since the completion of the proof-of-stake transition of Ethereum in 2022, the indefinite locking of staked funds has been a concern for participants. The official launch of the Shanghai upgrade (EIP-4895) this year has finally put an end to this issue. Over 13% of ETH has been staked, and this functionality opening will directly shake the supply and demand balance of the entire market, having a multi-level impact on holders' investment portfolios.

## The End of the Staking Dilemma

Ethereum successfully completed its merger in September last year, unifying the mainnet with the PoS beacon chain, marking the end of the mining era. However, this transition left an awkward regret—stakers are unable to withdraw funds. Even though participants contributed verification capacity and earned staking rewards, their locked 32 ETH have become permanently stagnant.

The Shanghai upgrade directly addresses this pain point. This hard fork was officially launched in March 2023, and its core improvement proposal EIP-4895 introduces a withdrawal mechanism for stakers. The development team agreed on the timeline as early as the beginning of 2023 and completed verification on the public testnet at the start of the year to ensure the stability of the upgrade.

## The Logic of Staking Operation

To understand the value of this upgrade, one must first grasp how Ethereum staking works. After transitioning to proof of stake, users no longer need to purchase mining equipment; they only need to stake 32 ETH to become validators on the network. Compared to Bitcoin's high-energy proof of work mechanism, this solution is more environmentally friendly and efficient.

The responsibilities of the validator are clear – to receive new blocks submitted by other nodes, check the validity of transactions and digital signatures, and finally confirm the blocks. This process not only maintains network security but also brings rewards to the validators. However, the previous dilemma was that regardless of the earnings, the principal remained frozen until the Shanghai upgrade activated the withdrawal channel.

## Chain Reaction on the Market Supply Side

Data shows that the current ETH stake accounts for 13.81% of the total supply – a significant amount of locked assets. The Shanghai upgrade allowing withdrawals means that this portion of liquidity will be released, giving stakers the freedom to sell or reallocate these assets.

This raises a direct question for traders and investors: Will the market face selling pressure as a result? The answer is not simple. On one hand, there is indeed the possibility that investors will choose to cash out their profits and exit. On the other hand, improved staking conditions may attract more capital participation, as liquidity constraints are eliminated. For many holders who were originally on the sidelines, directly staking on Ethereum has now become a real option.

## New Challenges Facing Liquidity Staking Platforms

This upgrade poses a latent threat to the ecosystem of liquid staking protocols. These platforms once attracted a large number of users who could not invest 32 ETH at once by promoting the idea of "enjoying staking rewards while maintaining liquidity." Now, the core functionality is no longer unique, and the value proposition of their native tokens faces reevaluation.

Investors holding tokens of such platforms need to reconsider their positions, as the competitive advantage has significantly weakened. The market may see funds gradually shifting from liquid staking solutions to native staking channels.

## Positive Market Effects Brought by Supply and Demand Freedom

From a macro perspective, Shanghai's upgrade has driven the healthy evolution of the Ethereum ecosystem. The liquidity of staked funds allows market participants to make rational choices based on real demand and expected returns, rather than being forced to hold. This increase in freedom can gradually create a healthy market equilibrium, reducing the distortion of ETH supply and prices caused by artificial policy factors.

In other words, the Shanghai upgrade not only liberated the stakers but also brought a more rational pricing foundation to the entire ETH market through the flexibility of the supply side.

## How should you respond

Stakers are now faced with a choice: continue staking to enjoy returns or withdraw funds to pursue other investment opportunities. Users of liquid staking need to assess the future prospects of the platform. Investors holding Ether should closely monitor changes in the staking proportion, considering it an important indicator for market supply.

This upgrade symbolizes a new phase in Ethereum's proof of stake mechanism, transitioning from "forced binding" to "active participation." Whether you are already staking, considering staking, or simply holding, the Shanghai upgrade has redefined the basis for decision-making.