Withdrawing Staked Ethereum May Take Weeks After the Shanghai Update

Ethereum's transition to a more energy-efficient proof-of-stake model was completed in September, but there is one final upgrade required to enable users to unstake their ETH from the network. According to an analyst at Nansen, a crypto data platform, this upgrade, called the Shanghai upgrade, is scheduled to launch on April 12, along with another upgrade called Capella.

However, due to the complexity of the process, it may take several weeks for users who staked ETH, either as individual validators or through platforms like Lido Finance and Rocket Pool, to withdraw their assets and rewards. This development is eagerly awaited by ETH holders, who are looking forward to accessing their staked funds.

Despite the upcoming ability for Ethereum users to withdraw their funds, they may not be able to do so immediately or all at once. Nansen data analyst Andrew Thurman warns that a lengthy withdrawal queue could result in wait times of several weeks for users seeking to access their funds.

The process of upgrading to Ethereum 2.0 began in December 2020, with the launch of the Beacon Chain - a parallel blockchain responsible for managing the staking process. Validators were required to stake 32 ETH to operate their own nodes, maintaining the network by processing transactions and providing a continual supply of blocks. This paved the way for Ethereum's shift to a more sustainable proof-of-stake model, with the upcoming Shanghai upgrade and Capella upgrade enabling users to withdraw their staked assets and rewards. However, the withdrawal process may be protracted due to the anticipated demand.

To meet demand, third-party decentralized platforms, including Lido Finance, allow users to stake their ETH without the hassle of managing their own validator nodes. Users deposit ETH into the Lido Finance smart contract and receive staked ETH (stETH) in exchange, an ERC-20 token equivalent to the deposited amount of ETH. The value of stETH fluctuates but remains pegged to the value of ETH. After the Shanghai upgrade, Thurman believes that the value proposition of projects like Lido may shift slightly but not change significantly.

With the withdrawal window set to open next week, users are wondering how long it will take to access their funds.

The Ethereum Foundation has stated that a maximum of 16 withdrawals can be processed within a single block, resulting in a maximum output of 115,200 per day. However, there are currently 564,000 validators on Ethereum's Beacon Chain, which raises questions about the timeline for processing all withdrawals.

Theoretically, it would take approximately five days to process all withdrawals. However, this timeline is likely to be extended due to high demand. Coinbase has already warned that it may take weeks to months for the protocol to process unstaking requests. Meanwhile, Lido has stated that it might not unlock withdrawals until early-to-mid May, citing the need for security audits.

Despite the possibility of a rush to withdraw staked funds, a significant portion of the ETH may be re-staked so that holders can continue earning rewards. It is currently unclear how much of the staked ETH will be re-staked.