Macauley Peterson

Ethereum developers have been targeting late March for the next major upgrade to allow withdrawal of staked ether, but that aspiration now appears to have been slightly optimistic.



The latest consensus estimate between Ethereum’s client developer teams is to deploy the Shanghai Capella upgrade to the network’s Goerli testnet on March 14.



No firm date for the eventual mainnet hard fork has been set yet, but the downstream effects to the agreed timeline are likely to bump Shanghai’s final deployment to about a month afterwards, developers said.



That means investors with staked ether will have to wait a little longer to withdraw. But there’s a silver lining, according to Noelle Acheson, author of Crypto is Macro Now and former head of market insights at Genesis: greater market clarity on <a href="https://blockworks.co/news/effect-ethereum-shanghai-upgrade-price">the impact to ether’s price</a>.



“It&#8217;s still ahead of the schedule that was being talked about right after the Merge,” Acheson told Blockworks, adding the delay will “give analysts more time to map out the possible impacts on the <a href="https://blockworks.co/price/eth" target="_blank" rel="noreferrer noopener">ETH</a> price — the high degree of uncertainty around the outcome is keeping ETH volatility and performance down.”



<h2>First stop: Goerli</h2>



The All Core Devs <a href="https://www.youtube.com/watch?v=GNhrb5txJ4M" target="_blank" rel="noreferrer noopener">call</a> on Thursday flagged a couple of minor issues uncovered after the <a href="https://blockworks.co/news/ethereum-steps-towards-staking-withdrawals-with-successful-testnet-upgrade">successful Sepolia testnet upgrade</a> which was completed earlier this week, but none is expected to adversely impact future Shanghai deployments.



Participants on the call then turned to scheduling the target date for Goerli, the final testnet, and agreed to aim for epoch 162304, which should occur at <a href="https://twitter.com/TimBeiko/status/1631372629721620480?s=20" target="_blank" rel="noreferrer noopener">roughly 6:25 pm ET</a> on March 14.



Consensus client software releases will be needed within the next five days to prepare for the upgrade test. No developers expressed any reservations about meeting that deadline, and preferred to see Goerli tested well in advance of the critical mainnet fork.



“I have a feeling that when a lot of the public validators are testing, we’ll uncover a slew of more issues, but that’s just a hunch,” Matt Nelson from the Besu client team said on the call, though he noted his team “didn’t have many issues with Sepolia.”



Project coordinator, Tim Beiko, reiterated the typical schedule for deployment to be expected.



“For mainnet we usually want to give people at least two weeks after the announcement,” Beiko said. “So imagine Goerli happens on the 14th, everything goes well, on the 16th we agree to move forward with mainnet — I think the earliest that puts us is like the first week of April, basically.”



Other developers on the call indicated the second week of April was more likely.



Ethereum upgrades have frequently been planned and then delayed — most notably <a href="https://blockworks.co/news/the-investors-guide-to-the-ethereum-merge/">the Merge</a> — as stakeholders involved in the process are generally happy to take a cautious approach rather than rush things.



Avoiding mistakes is key when you’re making major changes to a <a href="https://blockworks.co/price/eth" target="_blank" rel="noreferrer noopener">nearly $200 billion</a> network.



“All major upgrades are complicated undertakings, and the more testing, the better,” Acheson said.



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Ethereum Developers Push Back Shanghai Upgrade to Early April

Bessie Liu

<div id="highlights-block_62a7367176888" class="highlights">
 <ul>
 <li>People are selling their stETH tokens, causing liquidity problems</li>
 <li>For the time being, Celsius has suspended all withdrawals and transfers</li>
 </ul>
 
</div>



Lido’s crypto derivative representing staked ether (<a href="https://cms.blockworks.co/wheres-the-liquidity-crypto-lending-explained/#Liquid-Staking">stETH</a>) has slipped by roughly 6% compared to ether in the <a href="https://dune.com/dataalways/stETH-De-Peg" target="_blank" rel="noreferrer noopener">past 72 hours</a>, causing concern there could be another big crypto crash similar to last month’s collapse of LUNA.&nbsp;



<a href="https://cms.blockworks.co/wheres-the-liquidity-crypto-lending-explained/#Liquid-Staking">StETH is a token stand-in</a> for ether locked inside staking protocol Lido. The digital asset effectively constitutes the deposited ETH while Lido distributes associated staking rewards to its users. StETH tokens are minted when ether is deposited and burned upon redemption.&nbsp;



StETH has historically been considered a safe asset, effectively pegged 1:1 to ether and backed by ETH in Ethereum’s Beacon Chain, which has been running since December 2020.&nbsp;



StETH has been used as <a href="https://cms.blockworks.co/wheres-the-liquidity-crypto-lending-explained/#Crypto-Collateral">collateral</a> on open-source liquidity protocol Aave since March, allowing those who stake ether in support of Ethereum’s switch to proof-of-stake to gain leverage on their locked crypto.



Due to current market volatility, users are rushing to cash out their ETH from the Curve pool, a decentralized exchange liquidity pool on Ethereum designed for stablecoin trading. As a result, stETH is now harder to cash out than ETH – leading to de-pegging.&nbsp;



But unlike stablecoins with redemption mechanisms, stETH can only be unlocked on Ethereum’s proof-of-stake chain (once it goes live). The token is more akin to a liquid interest-bearing digital asset.&nbsp;



As such, stETH’s value cannot truly be equal with ETH due to associated risks with the impending <a href="https://cms.blockworks.co/shadow-forks-and-testnets-the-ethereum-merge-approaches/" target="_blank" rel="noreferrer noopener">Ethereum merge</a>, including delays and cancellations. When liquidity dries up in any market, the price of the associated asset will also dip.&nbsp;



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Staked ETH issued by Lido is backed 1:1 with ETH staking deposits. The exchange rate between stETH:ETH does not reflect the underlying backing of your staked ETH, but rather a fluctuating secondary market price.&mdash; Lido (@LidoFinance) <a href="https://twitter.com/LidoFinance/status/1535184472546889735?ref_src=twsrc%5Etfw">June 10, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Despite stETH’s recent drop from ETH parity, positive signs indicate it’s becoming less risky to own; the Ethereum Ropsten testnet <a href="https://cms.blockworks.co/ethereum-ropsten-testnet-successfully-merged-to-proof-of-stake/" target="_blank" rel="noreferrer noopener">successfully</a> moved to proof-of-stake last week.&nbsp;



Still, stETH has become a problem for some of its largest holders – including Celsius, a crypto lending platform where over&nbsp;<a href="https://www.linkedin.com/posts/petehuang_blockchain-crypto-web3-activity-6941378981409542144-1F1L/" target="_blank" rel="noreferrer noopener">$3.8 billion</a> has been deposited.



Celsius yesterday <a href="https://cms.blockworks.co/celsius-lending-platform-suspends-withdrawals-and-transfers/" target="_blank" rel="noreferrer noopener">suspended</a> all withdrawals and transfers. Despite recovering strongly this morning, Celsius’ own native CEL token is down about 60% over the past week and had fallen 34% in the past 24 hours, as of press time. It is currently down more than 96% from its early-June all time high.



Liquidity protocol Aave is now urging its community members to consider pausing the stETH market and halting ETH borrows “as an extra precaution.”



“Our risk monitoring system continues to measure risk in AAVE,” <a href="https://governance.aave.com/t/staked-eth-and-aave-risk-june-11th-update/8469" target="_blank" rel="noreferrer noopener">said</a> John Morrow, chief operating officer at Gauntlet, which performs risk assessments for the staking protocol. “As governance proposals take a few days to pass and go into effect, we are encouraging the community to consider the impact of the…changes carefully. If market conditions worsen we will strongly recommend that these actions be taken immediately.”



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Correction: Over $3.8 billion has been deposited with Celsius, not $3.8 billion worth of stETH. Updated June 13, 2022 at 6:11 pm ET.




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