Thread by @jerome_wong99

Ethereum will launch the "Shanghai Network Upgrade" in March 2023. What will be changed on @ethereum or, more generally, the #crypto ecosystem with this coming upgrade?

1) What is Shanghai Upgrade?
 
Conventionally, the upgrade of the @ethereum mainnet is named after the city, such as "London upgrade", "Paris upgrade", etc. The Shanghai upgrade will be another major update of @ethereum.

First, EIP 3540 will be introduced in the Shanghai upgrade will. EIP 3540 is an improved protocol designed to address changes in the Ethereum Virtual Machine Object Format (EOF) separating code from data, which is greatly beneficial to validators on the @ethereum network.

EIP 3540 will also bring a new smart contract that helps optimize processing and solve complex functional modules.

Besides, the Shanghai upgrade will also solve the withdrawal problem of the staked #ETH in the Beacon chain. At present, more than 15.7 million #ETH has been staked, accounting for around 14% of the total #ETH, but stakers cannot withdraw the staked #ETH.

Some protocols offering staking service such as @LidoFinance can alleviate this problem by issuing Liquid Staked Derivatives (LSD), while the Shanghai upgrade is expected to tackle this problem at root.

More importantly, the gas fee on the @ethereum network will be reduced in the Shanghai upgrade which will equalize the block size and add the CALLDATA function of the block.

2) The impact of Shanghai Upgrade
 
With the advancement mentioned above, the Shanghai upgrade will have a huge impact on the @ethereum ecosystem.

First, @LidoFinance's dominance will be challenged. Before the Shanghai upgrade, the #ETH staked on the Beacon chain cannot be withdrawn. @LidoFinance has gained a dominant market share with its strong network effect on #stETH, maximizing stakers' ability to withdraw.

With the coming Shanghai upgrade, it is expected that more and more #ETH will be staked.

In addition, the Shanghai upgrade can reduce the gas fees from #L2 running on @ethereum.

These #L2 solutions have already made @ethereum faster and cheaper, while the Shanghai upgrade will further reduce the gas fees of @ethereum, which could help #L2 gain more mainstream adoption and prosper the @ethereum ecosystem.