The Ethereum ecosystem is working on upgrades to improve scalability, security, and sustainability. Last year, it successfully transitioned to the proof-of-stake (PoS) consensus mechanism through the Merge event. Now, it is preparing for the next major updates through the Shanghai Upgrade, which will include the highly anticipated feature that allows the withdrawal of staked Ethers.

The Ethereum network has become a well-known smart contract ecosystem, but it faces competition from other blockchain networks like Solana (SOL) and Cardano (ADA) which are sometimes referred to as “Eth killers.” 

To prevent top DeFi projects from migrating to these competitor chains, Ethereum’s developers are introducing critical upgrades. About a year ago, Eth developer Tim Beiko listed potential items to be included in the Shanghai Upgrade. While the list includes about 12 items, Beiko noted that only a few will make it to the final list.

Ethereum Market Outlook Post Shanghai Upgrade 

The Ethereum network has the largest decentralized financial (DeFi) market in the crypto industry, with a total value locked (TVL) of approximately $23.78 billion, according to DeFi aggregate data from Defillama. In comparison, the TVL in the entire crypto market is around $39.76 billion, making Ethereum the dominant player in DeFi.

However, it is expected that a significant amount of these locked Ethers will be liquidated after the Shanghai upgrade in March of this year, leading to a drop in the TVL in the Ethereum ecosystem. Additionally, other proof-of-stake chains offer higher annual percentage rates (APRs) than Ethereum, which has an average APR of 4.9% with 15,845,519 Ethers staked by 495,172 validators.

The Shanghai upgrade, like the Merge event before it, is not likely to have a major impact on the price of Ethereum (ETH). However, global regulators are closely monitoring the crypto market following the collapse of FTX and Alameda, which may affect investor confidence. It is possible that the Ethereum market will return to pre-FTX levels as confidence recovers.