Ethereum’s Shapella Upgrade and the Future of Institutional Adoption

Today marks a major milestone for the Ethereum ecosystem: the Shapella Upgrade, which will allow for withdrawals of staked ETH. The Shapella Upgrade is a portmanteau of two upgrades happening simultaneously: Shanghai for the execution layer, and Capella for the consensus layer. It comes after ETH transitioned from proof-of-work to proof-of-stake through the Merge, which was completed in September 2022. The successful transition from PoW to PoS was a historic moment in distributed engineering that was over seven years in the making.

In January 2023, we looked back at the Merge and what it meant for the future of institutional adoption. At the time, Anchorage Digital Co-Founder and President Diogo Mónica spoke to TechCrunch and highlighted how “there was a big jump in interest post-Merge,” but many institutional participants were still waiting for the Shapella Upgrade before fully jumping into ETH staking.

Now, with the Shapella Upgrade successfully completed, we reflect on what it means for the future of institutional adoption and our institutional client base at Anchorage Digital.

The Shapella Upgrade: An Overview

Before the Shapella Upgrade, staked ETH had been locked, meaning participants could not withdraw it. While there was a timeline, nothing was certain. The Shapella Upgrade finally makes withdrawals of staked ETH possible and represents a major step forward in the continued decentralization and maturation of the Ethereum ecosystem.

While the option to fully withdraw staked ETH is a major upgrade, doing so is a dynamic, multistep process. Participants must first submit a signature to join an exit queue. The length of the exit queue is dependent on two factors: (1) the number of validators operating on the network at a given time and (2) the churn limit, a safety mechanism restricting the number of validators who can exit at once. For this reason, withdrawals may not be immediate for everyone.

After a participant makes it through the exit queue, they enter the withdrawal period. The length of the withdrawal period also depends on the number of validators trying to withdraw staked ETH at once. Together, the exit queue and withdrawal period put a theoretical limit of about 1,800 validators that can exit per day.

There is also the concept of a “partial withdrawal”, where the rewards a validator has accrued in excess of the 32 ETH staking minimum are automatically sent to the beneficiary address instead of being stuck in the validator. This occurs on average once per week and is independent of the full withdrawals described above.

ETH and Institutional Adoption

For institutions, entering ETH holdings into an unknown lock period may not have made sense. Both the assurance of successful technical upgrades and the ability to unlock staked ETH, are likely to interest more institutions in participating in Ethereum staking in the months ahead.

It’s worth noting that rewards for staking could change by participation levels. More parties staking, for example, will lower rewards, but will also strengthen network security, further decentralizing the Ethereum network.

According to Dune Analytics, ETH has also trended deflationary since January 2023, and as more ETH is unlocked and potentially spent, creating more network fees, it’s possible this trend could continue.

What’s Next?

Historically, most interest in ETH staking has come from crypto-native players, but with the ability to withdraw, more traditional institutions are poised to stake ETH. As a regulated, secure partner to institutions, Anchorage Digital is pleased to offer ETH staking. Existing users of this service can expect to see deposits from partial withdrawals shortly after the upgrade happens, with the ability to fully withdraw coming in the near future.

To learn more about Anchorage Digital’s staking services, clients should contact their relationship manager and prospective clients can get in touch with us.

About Anchorage Digital

Anchorage Digital is a regulated crypto platform that provides institutions with integrated financial services and infrastructure solutions. With the only federally chartered crypto bank in the US, as well as Anchorage Digital Singapore, which offers equivalent security and service standards, Anchorage Digital provides institutions an unparalleled combination of secure custody, regulatory compliance, product breadth, and client service. Founded in 2017, Anchorage Digital is valued at over $3 billion with funding from leading institutions including Andreessen Horowitz, GIC—Singapore’s sovereign wealth fund, Goldman Sachs, KKR, and Visa. Headquartered in San Francisco, California, Anchorage Digital is remote-friendly with offices in New York, New York; Porto, Portugal; Singapore; and Sioux Falls, South Dakota. Learn more at, on Twitter @Anchorage and on LinkedIn.

This post is intended for informational purposes only. It is not to be construed as and does not constitute an offer to sell or a solicitation of an offer to purchase any securities in Anchor Labs, Inc., or any of its subsidiaries, and should not be relied upon to make any investment decisions. Furthermore, nothing within this announcement is intended to provide tax, legal, or investment advice and its contents should not be construed as a recommendation to buy, sell, or hold any security or digital asset or to engage in any transaction therein.

Additional reading

Eight Questions: CJ Jouhal, Head of Engineering, Anchorage Digital
Serving Institutional Crypto Needs With Anchorage Digital
Eight Questions: Moses Lee, Head of Asia, Anchorage Digital Singapore
EDX Markets Selects Anchorage Digital as Custody Provider for New Clearinghouse Business
Introducing the Rekt Test
The Lifecycle of Staked ETH