Ethereum Turns 9: The Nine Milestones That Changed Crypto

Ethereum made a significant shift from its proof-of-work (PoW) consensus mechanism to proof-of-stake in a move dubbed “Ethereum 2.0,” in 2022. This transition required support from a separate chain utilizing PoS, leading to the launch of the Beacon Chain on Dec. 1, 2020.

The Beacon Chain was crucial for Ethereum 2.0’s success, introducing PoS to the Ethereum ecosystem. It ensured the PoS system was robust and viable, before being integrated into the Ethereum Mainnet. Running alongside the original PoW Ethereum chain, the Beacon Chain validated and tested the new PoS operations.

In August 2021, Ethereum introduced an upgrade called EIP-1559, which made it the first blockchain to start burning a portion of transaction fees. This change aimed to counteract the issuance of new Ether tokens and promote a more sustainable monetary policy.

The strategy proved effective. In the following 1000 days, Ethereum users burned approximately 4.3 million Ether, valued at over $12.7 billion, simply through network usage.

In September 2022, Ethereum further reduced Ether emissions by transitioning to a proof-of-stake consensus mechanism. This shift made the network deflationary, meaning that more Ether was burned than newly issued, on average.

The popularity of NFTs skyrocketed in 2021, marked by record-breaking, multimillion-dollar sales. Celebrities like singer Shawn Mendes, socialite Paris Hilton, and former First Lady Melania Trump joined the NFT craze, further fueling its widespread adoption.

The Merge, Capella, and Shanghai Upgrades

The upgrade marked Ethereum’s long-awaited transition from a PoW to a PoS network, with the Beacon Chain going live on the mainnet at block 15,537,394 on Sept. 15, 2022.

In preparation for the Merge , the Ethereum Foundation set specific requirements for validators wishing to join the PoS network. Participants were required to deposit their ETH to initiate the new consensus model. Consequently, over 400,000 validators participated , collectively staking approximately 13,000,000 ETH, before the Merge took place.

The latest upgrades to the Ethereum architecture, known collectively as “Shapella,” were implemented simultaneously on April 12, 2023. These upgrades allowed validators to withdraw their staked ETH for the first time.

Before Shapella, validators who participated in the proof-of-stake network after the Merge were unable to withdraw their staked Ether ETH and had to wait for the Capella and Shanghai upgrades. There were concerns that allowing withdrawals would lead to a sharp decline in ETH’s market value due to significant token withdrawals. However, on-chain data showed that most withdrawals consisted of staking profits rather than the originally deposited ETH.

Following the upgrades, ETH’s price experienced an upward trend. This increase in value was attributed to the growing confidence among validators and stakers, who now had the flexibility to withdraw their staked ETH at any time.

This newfound ability to withdraw staked ETH enhanced the perception of the Ethereum 2.0 staking mechanism, making it more attractive compared to the pre-upgrade period when withdrawals were not possible.