What Is Shapella Upgrade?
Also known as: Shapella, Shanghai-Capella, Shanghai Upgrade, Shapella Hard Fork
In short
Shapella is the Ethereum network upgrade activated in April 2023 that let validators withdraw their staked ETH and accrued staking rewards for the first time; its name combines the Shanghai and Capella upgrades.
Since The Merge, Ethereum has had a two-layer structure: the execution layer, which runs transactions, and the consensus layer, which manages Proof of Stake consensus. Shanghai is the name of the changes on the execution layer and Capella is the name of those on the consensus layer; because the two were activated at the same time, they are referred to together as Shapella. EIP-4895, at the center of the upgrade, made ETH withdrawals from the Beacon Chain to the execution layer possible.
From the end of 2020, when the Beacon Chain launched, until Shapella, staked ETH remained locked; validators could withdraw neither their principal nor their rewards. With Shapella, two types of withdrawals were defined: partial withdrawals, in which accrued rewards above 32 ETH are automatically transferred at regular intervals, and full withdrawals, in which those exiting validation receive their entire balance. To protect the stability of the network, the number of validators that can exit within a given period was limited.
Before the upgrade, concerns had been raised that a large wave of selling could occur. The ability to withdraw made staking more flexible, eased the redemption processes of liquid staking services and removed a significant uncertainty for institutions and individuals considering staking ETH.
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