Ethereum, the second-largest crypto by market capitalization, is on track to unlock staked ETH tokens after the Shanghai hard fork in March 2023.
The big Ethereum upgrade includes an improvement which allows users to unlock their Ether (EIP 4895), which may cause market gyrations.
Following ‘The Merge’ success story, Ethereum developers are now working on ‘The Surge’. The Merge was the platform’s transition from a proof-of-work (PoW) to a proof-of-stake (PoS) network, reducing its energy usage by 99 percent at the expense of making the network more reliant on large stakeholders.
Two birds with one stone
Developers have also been working on a staked token unlock via the Ethereum Improvement Proposal (EIP 4895). Both upgrades are expected to be launched around the same time period.
Recently, developers confirmed that ‘The Surge,’ (EIP 4844), known as proto-danksharding, will be prioritized after the staked token unlock. EIP-4895 was introduced following criticism over the lack of a staked ETH withdrawal functionality since Dec. 2020.
Around the same time, ‘The Surge’ is set to take layer-2 scaling solutions to a new level, preparing the chain for sharding in the process. Ethereum ‘sharding’ refers to splitting the database horizontally in order to spread the network load. In other words, it divides large volumes of data required for cheaper roll-up technology and easier node operations.
Since the PoS transition, sharding has become a bigger focus for Eth developers, with Vitalik Buterin underlining his enthusiasm of rollups in a Dec. 2022 blog. In a nutshell, Sharding is designed to help reduce network congestion and increase Ethereum’s transactions per second (TPS).
Ethereum tends to experience volatility around major events or upgrades. The token unlock event will allow validators to withdraw their (32) staked Ether from the staking contract. This means that a portion of the unlocked ETH could make its way to the open market, causing volatility.
Regardless, Eth users will be looking forward to a reduction in gas fees, even if it is an interim solution for the network.