The history of Ethereum’s Shanghai upgrade and restaking rotation

The Shanghai upgrade in April 2023 released approximately 18 million ETH, which constitutes 15% of the total circulating supply, from the Ethereum blockchain. This transition allowed investors to withdraw the $31 billion stash that began accumulating at the end of 2020. Before this permission, investors could only access tokens representing staked ETH on platforms like Lido rather than actual ETH. Jim McDonald, CTO of Attestant, predicted that the price of Ethereum would dip sharply because 50% to 70% of early withdrawers intended to cash out. However, some analysts like Alex Esin from P2P.org expected the impact to remain muted because withdrawal queue restrictions would limit the immediate supply. The upgrade included Ethereum Improvement Proposals 3651, 3860, and 3855 to restrict transaction costs for technical applications. Developers called the combination of Shanghai and Capella upgrades Shapella. The network expected to process the 6,209,536th slot on April 12. Many stakers pooled ETH from regular investors who could not meet the 32 ETH requirement.

Validator mechanics and the exit queue

Withdrawal mechanisms depend on the specific credential type assigned to a validator. Legacy validators, or Type 1, have an effective balance cap of 32 ETH and receive automatic, regular reward sweeps. Compounding validators, or Type 2, allow rewards to increase the validator’s effective balance up to a limit of 2048 ETH.

The network uses a churn limit to regulate how many validators join or leave the network during a single epoch. This parameter protects the stability of the consensus layer by preventing massive, simultaneous changes to the active validator set. For every 65,536 additional validators that become active, the number of new validators that can be activated per epoch increases by one. If the number of validators attempting to exit exceeds the churn limit, they must wait in a first-in-first-out exit queue. To exit, a validator signs a VoluntaryExit message with their validation private key. Voluntary exits require a 27 hour period before the funds become withdrawable, while slashed validators must wait 36 days. Block proposers sweep through the queue to find 16 eligible withdrawals per block. New validators must also wait at least four epochs to ensure the RANDAO random beacon remains unmanipulated.

Liquid staking dominance in 2026

Liquid staking protocols permit users to stake assets while retaining tradeable tokens. By mid-2026, approximately 39.7 million ETH represented about 33% of the total supply. Liquid staking accounts for roughly 36% of that staked total, or 14.4 million ETH across over 30 protocols. Lido remains the largest provider, holding 8.9 million ETH and commanding 62% of the liquid staking market. If you want deep liquidity, you use Lido’s stETH. Lido charges a 10% fee on staking rewards, which the protocol splits evenly between node operators and the DAO treasury.

Lido uses a rebasing model where the balance in a user’s wallet increases daily as rewards accrue. Rocket Pool offers a decentralized alternative where anyone can run a node with 4 ETH. The Saturn I upgrade in February 2026 halved the minimum bond from 8 ETH to 4 ETH and introduced megapools. Rocket Pool operates with roughly 3,900 independent node operators across 150 geographic regions. Binance provides wrapped staked ETH through BETH, which users can wrap into wBETH. As of current data, 1 wBETH equals 1.10 ETH. Coinbase manages a custodial service that charges a 25% commission on staking rewards, which is the highest fee among major platforms. The base consensus layer APR sits at approximately 2.78%. Mantle’s mETH product holds approximately 211,000 ETH and uses a liquidity buffer in Aave to reduce redemption wait times to roughly 24 hours.

EigenLayer and the restaking rotation

EigenLayer dominates the restaking market with a 94% market share and $15.258 billion in total value locked. This dominance led to the 2026 restaking rotation, where 45% of assets shifted after EigenLayer established its position. The Kelp DAO exploit in April 2026, which lost between $280 million and $293 million through a LayerZero bridge vulnerability, proved that bridge dependencies constitute a real risk for liquid restaking tokens. This exploit occurred after EigenLayer secured tens of billions of dollars in restaked assets across over 100 Actively Validated Services.

The restaking economy relies on Actively Validated Services that pay restakers for borrowed security. EigenLayer uses the EIGEN token, which has a total supply of 1,793,689,817 tokens. The protocol proposed ELIP-12 to establish a 20% fee on subsidized Actively Validated Services rewards to fund EIGEN buybacks. EigenLayer secured a $50 million Series A led by Blockchain Capital in March 2023 and a $100 million investment from Andreessen Horowitz in February 2024. Will the concentration of assets in a few liquid restaking tokens create a single point of failure for the entire network? Users typically choose between direct restaking or using liquid restaking tokens like ether.fi’s weETH or Renzo’s ezETH.