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Shapella could bring institutional investors to Ethereum despite risks

Shapella could bring institutional investors to Ethereum despite risks


Ethereum’s Shanghai/Capella upgrade — also known by the portmanteau Shapella — may not be the technical marvel of last year’s “Merge” or introduce turbocharged speeds to the network. 

Volumes of over 100,000 transactions per second will have to wait for future “danksharding” upgrades, according to the Ethereum Foundation.

But the hard fork remains an important step on Ethereum’s roadmap to the future, i.e., further shoring up the network’s new validation mechanism while (potentially) removing barriers for institutional investors.

Currently scheduled for 10:27 pm UTC on April 12, the upgrade will allow stakers to unlock their Ether (ETH) rewards — or even exit staking entirely — for the first time since September’s Merge.

Pre-fork publicity hasn’t matched that surrounding last autumn’s change of consensus mechanisms from proof-of-work to a proof-of-stake (PoS). “This time, we won’t have a war room,” Freddy Zwanzger, Ethereum ecosystem lead at Blockdaemon, told Cointelegraph. Still, “there’s always risks” when one reshuffles the deck like this.

Ethereum’s stakers and validators will shortly be able to withdraw $32 billion of Ether from the Beacon Chain, which accounts for about 15% of the ETH’s circulating supply, according to Coinbase’s April 5 newsletter. Some worry that the upgrade, also known as the Shanghai hard fork, may lower the overall number of validators and put selling pressure on the network, among other concerns.

“Every hard fork brings some upgrade risk,” Paul Brody, EY’s global blockchain leader, told Cointelegraph, especially in cases like this where you’re enabling withdrawals. On the technical side, there could be bugs latent since “day zero” in some of the network’s staking smart contracts, for example, that may not emerge until the withdrawal date — though Brody doesn’t think that’s likely.

The upgrade should mitigate risks for investors. “Lower volatility plus a yield makes for a more familiar and less risky asset to hold long-term,” Rich Rosenblum, co-founder and president at GSR, a crypto market-making firm, told Cointelegraph.

More institutional investors?

Will Shapella really attract more…

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