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Ethereum’s transition to a more energy-efficient proof-of-stake model in September marked a significant milestone in the cryptocurrency’s history. However, completing the upgrade to allow users to unstake their ETH from the network remained a crucial step. According to Andrew Thurman, a data analyst at crypto data platform Nansen, the upgrade process could take weeks to complete.

Ethereum’s Journey to Proof-of-Stake

The Ethereum 2.0 upgrade process began in December 2020 with the launch of the Beacon Chain, a parallel blockchain to Ethereum responsible for managing the staking process. Third-party decentralized platforms such as Lido Finance let users stake their ETH without managing their own validator nodes. To date, more than 18 million ETH (about $33.6 billion) has been staked and locked into the Beacon Chain across 564,000 validators. The current annual percentage yield (APR) for validators is 4.4%, providing an interest-like return for stakers.

The Upcoming Shanghai Upgrade

The final step in Ethereum’s transition will be the launch of the Shanghai upgrade on April 12, paired with another upgrade called Capella. These upgrades are highly anticipated by users who staked ETH in the network, as they will finally be able to withdraw their assets and accumulated rewards. However, users may not be able to withdraw their funds immediately, or all at once, due to a withdrawal queue that could take weeks to process.

The Withdrawal Queue and Timeline

Ethereum Foundation states that a maximum of 16 withdrawals can be processed in a single block, totaling a maximum output of 115,200 per day. Currently, there are 564,000 validators on Ethereum’s Beacon Chain, and in theory, it would take about five days to process all withdrawals. However, demand requests are likely to extend this timeline. Coinbase has announced that it “may take the protocol weeks to months [to] process unstaking requests,” and Lido has said it could be early-to-mid May before it unlocks withdrawals due to security audits.

The Value Proposition of Lido Finance and Similar Projects

Even after the Shanghai upgrade, projects like Lido Finance still hold value. Andrew Thurman believes that being able to use staked ETH as collateral in DeFi is crucial for those pursuing sophisticated interest or yield-bearing strategies. While liquidity may become slightly less important, there is still a role for these tokens.

The Future of Staked ETH

It is difficult to predict how much staked ETH will be re-staked after users withdraw their funds, but it is likely that a significant portion of it will ultimately be restaked so that holders can continue earning rewards.

Conclusion

The Ethereum Shanghai Upgrade unlocks close to 18 million staked ETH from the blockchain, marking the completion of Ethereum’s most significant upgrade to date—the Merge. The new proof-of-stake method gives out freshly minted ETH as a reward for those who “stake.”