On Wednesday (March 15), Coinbase explained what its users need to know about Ethereum’s upcoming Shapella Upgrade, which allows for withdrawals of staked Ether ($ETH) and is expected to be deployed to the Ethereum mainnet around mid-April.
There have been concerns that the ability to withdraw funds could lead to an oversupply of $ETH on the market, especially since there’s approximately $29 billion worth of $ETH staked on the Ethereum network. However, according to a recent CoinDesk report, the crypto analysts said that the volume of $ETH outflows would not be as much as many people expect, and investors should not worry about it.
According to Coinbase’s tweetstorm about the Shapella Upgrade (which includes Shanghai and Capella), users can continue staking their $ETH and earning up to 6.0% APY without any action required, as assets will remain safe during the upgrade. About 24 hours after the upgrade is completed, Coinbase will start taking unstaking requests. All requests are processed on-chain, and Coinbase will pass the unstaked funds and staking rewards to users once the Ethereum protocol releases them.
As Coinbase only acts as a conduit for the unstaking process, it cannot provide an exact waiting period for users requesting to unstake. However, the company anticipates high demand for unstaking soon after the upgrade, which may lead to the Ethereum protocol taking weeks to months to process unstaking requests.
As for Coinbase’s blog post, Coinbase offers a token, cbETH ($CBETH), for users needing immediate liquidity for their staked $ETH. Users can wrap staked $ETH (ETH2) to $CBETH on the Coinbase app to sell or use it in DeFi without fees while still earning staking rewards.
The blog post went on to say that Coinbase Prime, Exchange, Wallet, Cloud, and Commerce customers should experience minimal to no impact from the Shapella Upgrade. Following the upgrade, US Coinbase customers holding staked ETH (ETH2) or cbETH will generally become liable for taxes owed on any rewards earned, with Coinbase issuing required 1099-MISCs for taxable activities relating to these assets.
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