What was Shapella?

Source: https://ethereum.org/

What's with the name?

Shappella is the short hand name for the most recent upgrade to Ethereum. Ethereum is split into two networking layers (not to be confused with layer 1 and 2 blockchains). The networking layers are:

1. The consensus layer - referred to as the Beacon chain
2. the Execution layer - this is where contracts are executed and things happen

The Shapella upgrade consisted of two upgrades at once, Shanghai on the execution layer, and Capella on the consensus layer

Like everything else, we shortened the name to the Shapella upgrade

what did the upgrade do?

The main piece of functionality for the upgrade was that participants in the beacon chain needed to stake Ethereum in order to participate in consensus and earn the rewards. Until now, there was no way to withdraw the funds. the Shapella upgrade allowed stakeholders to withdraw their funds.

How much funds are staked?

source:https://ultrasound.money/
According to ultrasound money, there was approx 19m ethereum staked, which will now be allowed to be withdrawn. this is approx 16% of all Ethereum. the concern was this coudl flood the market and the price dip, but most commentators didnt think that would be the case. The main reasons were:

1. Ethereum has set limits on the number of withdrawals, with most withdrawals being partial initially (i.e. rewards only)
2. the uncertainty about unstaking meant institutional investors did not participate in staking for liquidity reasons, now they have certainty on how to unstake there could be further institutional demand for staking and Ethereum.

What happened after the upgrade

Deposits

A really good website to get data on the beacon chain, is https://beaconcha.in/

From this we can see deposits kept on coming in, actually they jumped up to 100k ETH per day form April 12 (which was the day of the upgrade)

Source:https://beaconcha.in/validators/deposits

Withdrawals

Withdrawals started too, and they have exceeded new deposits, but not as material as some would expect.

source:https://beaconcha.in/validators/withdrawals

On April 14 for example deposits and withdrawals were both roughly 100k ETH, thereby the liquid supply roughly stayed unchanged.

Price

So what did this all do to price? You probably are living under a rock if you didn't know how Ethereum moved pricing. The price rose pretty convincingly approx. 10%+

source: https://trade.dydx.exchange/trade/ETH-USD

What's next for Ethereum

The next upgrade will liekly focus on EIP-4844 also known as proto-danksharding. This is a stepping stone towards full danksharding which is Ethereum's end state for scaling using layer two chains. What this means is that Ethereum will now have two types of data. one that last forever on the blockchain, and new BLOBs that only last for weeks, long enough to perform consensus operations on rollups. This will dramatically reduce the fees on rollups as the BLOBS will have a lower gas fee than calldata, which is on the chain forever. This might mean that Layer 2 chains will get a boost out of the next upgrade, we have already see Arbitrum take off, which chain is next?