Chris Burniske Expects Drop In Eth Supply Post Shanghai Upgrade

Staking means locking up cryptocurrencies in order to support the processing of transactions on a network of nodes.
CryptoQuant says that 60% of staked Ethereum is running at a loss after the Shanghai upgrade.

The Shanghai upgrade will upgrade the consensus mechanism of the network, from PoW to PoS. Users will be able to stake their Ethereum with greater confidence, and reap rewards from the network. Ethereum maintains liquidity by locking up a part of its tokens in dead addresses. The upgrade is also designed to improve network security.

What is the Shanghai Upgrade?

The Shanghai upgrade also called the London Hard Fork implements the Ethereum Improvement Proposal (EIP) 1559. The proposal aims to improve processing efficiency and reduce transaction fees for transactions. This upgrade will allow users to stake Ethereum in the network and become a validated node in the blockchain by paying a fee of 32 Eth.

In addition to financial support, the upgrade will also provide technical support, to make sure that staking is conducted in a safe manner. By providing a secure platform for staking, users are adopting Ethereum on a bigger scale. However, due to Ethereum’s finite supply, developers lock up staked Ethereum to maintain liquidity in the market.

By de-risking staking, improving security measures and providing better gains, the Shanghai upgrade will help strengthen the Ethereum network. As more users leverage their cryptocurrency, the network becomes more decentralized and less susceptible to attacks from hackers. In return for staking cryptocurrency, the users receive rewards in the form of tokens.

Why is Ethereum Being Locked?

Ethereum supply is facing an imbalance due to the fact that Eth is a deflationary currency. A certain amount of Ethereum tokens is locked in the ecosystem to maintain liquidity. The EIP-1559 proposal stated that gas fees will be burnt while making transactions on the network, thereby limiting the supply. This potentially increases the value of the remaining Eth to ensure its long term stability.

Ethereum is being locked to create a sense of scarcity in the market, This move has attracts crypto traders to invest in the Ethereum network. The network allows seamless transactions almost instantly via gas fees, which get burnt and sent into dead wallet addresses. As Ethereum continues to grow in popularity, the scarcity created in the market has affected the price of Ethereum.

What Did Chris Burniske Say About Staking?

Chris Burniske, a cryptocurrency analyst and co-founder of Placeholder, stated that the Ethereum market is currently volatile and looks bearish. Users can pay 32 Eth to become a validated node in the blockchain to process transactions and earn rewards.

The upgrade creates a shortage of supply in Ethereum to drive the demand of the remaining coins. The burning of gas fees will eventually reduce with time, leading to greater scarcity. Burniske also said that this staking policy is still new. He also anticipates the launch of the Shanghai Capella upgrade by April 12th, 2023.

Developers are ready to launch the Shanghai Capella upgrade in some time. The efficient EIP-1559 proposal has also improved security and scalability of the network, following a shift from PoW to PoS consensus mechanism.

Andrew is a blockchain developer who developed his interest in cryptocurrencies while his post-graduation. He is a keen observer of details and shares his passion for writing along with being a developer. His backend knowledge about blockchain helps him give a unique perspective to his writing