Ethereum has launched Shandong, the testnet version of its Shanghai upgrade. It is the first major update in the blockchain since the Merge last September.
Shandong provides implementation data to the blockchain's developers before Shanghai's official deployment. This testnet allows developers to perform experiments with the technical aspects of Shanghai without jeopardizing the entire ecosystem. This testnet is projected to run until September next year.
Shanghai offers a “significant” improvement on the underlying tech of the network’s smart contracts, Ethereum Virtual Machine (EVM). The upgrade, an EVM object format called EIP-3540, will aid on-chain validators in their tasks since it distinguishes coding from data.
According to Axelar content lead Galen Moore, EIP-3540 improves the interoperability of the Ethereum ecosystem.
“Currently, layer-2 networks on Ethereum use a cumbersome code validation process,” Moore said. “EIP-3540 separates code and data, making that process more efficient. It’s especially good news for the growing ecosystem of Polygon Supernets — Decentralized application chains built on Polygon Edge.”
Currently, users cannot directly withdraw sETH from the blockchain due to stability issues. The upgrade to EIP-3540 is expected to enable the withdrawal of staked Ether (sETH). This upgrade can also reduce gas fees by ensuring that block sizes are similar and increasing the efficiency of communication with the base chain.
Ethereum kicked off its major development project with the Merge, the first stage in the five-step project. The Merge combined the blockchain’s mainnet with the Beacon Chain, changing its mechanism to proof-of-stake consensus, allowing Ethereum to reduce energy consumption by 99 percent.
The next stage for the blockchain's development is the Surge, which aims to improve the scalability of its data storage and access. The next steps that Ethereum will take to conclude the project are the Verge, Purge and Splurge, which will take place in the next few years.
ETH’s price goes up
Following the news of the Shanghai upgrade, the price of ETH went up to $1,332 per unit on Tuesday, increasing by four percent compared to last week.
Previously, after the hype of the Merge went down, Ethereum’s price plummeted significantly. Analysts said that many investors were wary of the transition to the new mechanism, which reportedly increased the network’s security risk.
CoinShares analyst Marc Arjoon, however, said that the Merge had improved the credibility of the blockchain. He argued that it could draw more institutional investors and lead to the stabilization of the ETH market.
“The bolstering of Ethereum’s environmental, social and corporate governance (ESG) credentials should be good for regulatory-driven institutions that want to start to explore the Ethereum ecosystem,” Arjoon said.
The new version of Ethereum offers several advantages over traditional financial institutions. Fidelity Digital revealed that the Merge had enabled token holders to generate interest from ETH staking. This development, however, invites legal issues as the token operates like traditional security assets.
Analysts have warned that crypto adoption among traditional financial institutions will not necessarily accelerate due to the Merge, especially given the global economic volatility. They argued that future updates would determine whether these institutions would fully embrace ETH.
The entire crypto market saw a 1.6 percent increase on Tuesday, with a total valuation of $980 billion. BTC, the largest market shareholder, reached a valuation of $19,606 per unit, increasing 1.68 percent in 24 hours. The token’s market capitalization hovered around $376 million.