It has been revealed that the first testnet for the Shanghai upgrade will start in February. This has raised the expectations for the first major upgrade after the Merge. If everything works out fine, then we could witness another Ethereum hard fork as early as March. Of course, this date is not set in stone, but Shanghai might move the market in a new direction this year.

What is all the buzz about and which tokens are profiting from the staking narrative?

Ether is going to be “unlocked”

When Ethereum started staking it effectively did so on a different network called the beacon chain. This beacon chain was started in late 2020 and was connected with the actual Ethereum blockchain in September 2022. Hence the name Merge.

The problem for stakers who started out early with Ethereum staking is that their Ether is still locked. They moved Ether to a smart contract locking it on the Ethereum blockchain and unlocking it on the beacon chain. After the Merge was commenced their stake wasn’t automatically unlocked. Both chains were fused into one, but stakers are still waiting for their assets to become liquid.

Liquidity issues were partly solved when Lido introduced liquid staking. Stakers would receive stETH for staking with Lido and each token represented the claim for 1 Ether that was stuck in the smart contract. This had led to a situation where Lido took the pole position among staking pools. This has raised concern that a single staking service could create a single point of failure for Ethereum and since this debate started the broader Ethereum community is looking to solve this issue.

Will investors bet on Ethereum staking?

Once Shanghai has been successfully rolled out, staking will become fully liquid. This has led to a lot of speculations in the recent weeks. More staking protocols are evolving and aim to conquer at least some of Lido’s market share.

Many analysts believe that this will lead to a new development in Ethereum’s ecosystem that will attract many more investors. They can not only enjoy a passive income with relatively low maintenance costs to hold their positions. What is even more important to them is the fact that they will enjoy full liquidity with Ether no longer being fully locked in staking.

It is this aspect that is leading many to believe that Ethereum could enter a new area with more institutional investors looking to buy a stake in the worlds most important smart contract platform. This sentiment is reflected by the recent price surge of LDO.