Ethereum Shanghai Upgrade: Release Date and Improvements
The Ethereum mainnet (PoW chain) successfully integrated with Beacon Chain (PoS chain) in a major upgrade known as the merge on September 15, 2022. As a result, the network has permanently switched from the PoW mechanism to the PoS mechanism. With this change, the network is preparing for another upgrade called the ‘Shanghai upgrade,’ which will take place in 2023.
This upgrade is highly anticipated and promises to include more features for the Ethereum network to improve functionality. To pave the way for the upgrade, EF DevOps announced the launch of an experimental Pre-Shanghai testnet — Shandong!
What Is the Shanghai Ethereum Upgrade?
There is no precise definition of Shanghai; we just know it is the next upgrade after the merge. Tim Beiko, in his blog, initially introduced 3 major changes that would come with the Shanghai upgrade. After that, the EF DevOps introduced 5 improvements they intended to test when Shandong went live on October 14, 2022, some of which we already know about.
They are:
- EIP-3540: EVM Object Format (EOF) v1;
- EIP-3651: Warm Coinbase;
- EIP-3670: EOF — Code Validation;
- EIP-3855: PUSH0 Instruction;
- EIP-3860: Limit and Meter Initcode.
Highly Anticipated EIPs of the Shanghai Upgrade
EVM Object Format
The first improvement, the EVM object format (EOF), aims to separate the code from the data. The advantages of separating code and data for on-chain code validation are emphasized in the EIP-3540. Furthermore, it may pave the way for introducing new contract code section types, which may help implement more complex features such as Account Abstraction, control flow in the EVM, and EIP-3074.
EIP-3670, a counterpart to EIP-3540, will provide code validation for EOF contracts upon deployment. Contracts containing missing PUSH data or ambiguous instructions can thus be rejected.
Beacon Chain Withdrawals
The deployment of Beacon Chain withdrawals is another significant change due to Shanghai. The Ethereum network settled on EIP-4895: Beacon chain push withdrawals as operations after considering many proposals. EIP-4895 will allow Beacon Chain holders to withdraw staked ETH and rewards accumulated.
The addition of a system-level ‘operation’ to ‘push’ validator withdrawals from the beacon chain to the EVM is another feature of this upgrade. For the specified recipients, these operations result in unconditional balance increases.
Layer 2 Fee Reductions
The final important improvement to come with Shanghai is the most debated. Since L2s post the evidence of their transaction data on L1, a sizable amount of end users’ transaction fees come from the amortized gas fee of L1 data storage. A full sharding implementation is still unavailable, despite the specification appearing to be finished.
EIP-4844 will propose a proto-danksharding method to decrease transaction fees on Layer 2 rollups. As a result, the network could process more data; and, in turn, bring down the gas fee.
When Will the Shanghai Upgrade Take Place?
Initially, it was reported the upgrade would happen 6–12 months after the merge as answers to questions regarding the date for locked ETH withdrawal. However, following the release of Shandong, it was announced the upgrade would happen in September 2023.
Conclusion
Following the Shanghai upgrade, a much-anticipated feature will be made possible. That is the gas fee reduction, which has always been a challenge for the network, especially when it is congested. And what about the price of ETH? It is difficult to predict if the planned update would increase the price of ETH because upgrades like this do not guarantee a value increase.
Furthermore, Ether holders should know that the Shanghai upgrade may occur later than the date mentioned due to delay. But, of course, delays like these are common. Even the Ethereum merge and other major upgrades in the crypto space get postponed due to fixes and tests.
