Ethereum’s Zhejiang Staking Withdrawal Testnet for Shanghai is Live

At 15:00 UTC on Wednesday, the much-anticipated Zhejiang testnet for staking withdrawal went live on Ethereum’s Beacon chain. Zhejiang will enable the testing of the Ethereum Improvement Proposal (EIP) 4895 which allows for staking withdrawals. This is in preparation for the network’s next major update, the Shanghai hard fork slated to launch sometime in March.

Users Can Make Simulated Withdrawals with Zhejiang

In a tweet yesterday, DevOps engineer at Ethereum foundation Barnabas Busa gave details about the Zhejiang testnet slated for today. According to him, Users of the testnet will be able to take part in simulated withdrawals where they can deposit ETH to validators. Six days later, the Shanghai and Capella upgrade will also be activated to allow the withdrawal of the funds.

A few weeks ago, there had been some disagreement among Ethereum Devs about how soon the update should be launched. Apparently, some factions believed launching too early might incur future  technical debt while others didn’t feel the same way. However, it appears there are no longer signs of delay. 

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Currently, since the Merge, Ethereum has supported a significant amount of staking-related functionalities, which also means users earn rewards for staking as well.

However, one problem with the staking service was that validators were not allowed to withdraw staked Ethereum. This measure was adopted to preserve the integrity of the network in case validators ever tried to move out en masse. 

Unfortunately, it also meant that staking assets on the Ethereum blockchain was an illiquid investment. The Zhejiang testnet is Ethereum’s response to this situation, the next step in a process that will culminate in March. Although, no actual date has been fixed yet for the new feature’s transfer to the mainnet with the Shanghai hard fork.

Staking Withdrawals to Follow with Shanghai Hardfork

Once that happens, users will be able to withdraw funds and rewards locked for more than two years. Notably, the funds will not all be unlocked in one go. Instead, any eligible fund will be released in batches to maintain the stability of the network. The process encompasses two stages where validators have to first join an exit queue subject to a “Churn limit”. Following this, validators must wait for a withdrawal period regulated according to the number of people who wish to withdraw their assets.

As of now, the testnet offers users an experience of the upgrade’s process and network functionality prior to the eventual fork.

Ethereum Price Holds Steady

Many market analysts believe the coming upgrade could be advantageous for Ethereum staking. Also, platforms for liquid staking like Lido could benefit from it since they provide more prospects for yield than direct staking.

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Amid Shanghai preparations, ETH price has remained relatively stable for the past weeks. At the time of writing, ETH trades sideways just below the $1600 price point.

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