The Shanghai upgrade (Shapella) is one of the most important updates this year for Ethereum, the world's second largest cryptocurrency network. The upgrade is split into three parts: a consensus layer upgrade (Capella), an execution layer upgrade (Shanghai) and an Engine API which combine to change the Ethereum protocol. The Shanghai upgrade enables Ether stakers to reclaim their staked Ether along with any accumulated staking rewards.

Regulatory measures led to the Securities and Exchange Commission sending regulatory claims against Kraken, due to their failure to register their staking program in the United States. After Kraken agreed to pay a $30 million penalty, they are now in the process of recovering their 556,000 ETH from the network, which is equivalent to 63.3% of the 868,000 ETH held in the Ethereum withdrawal queue.

The exchange, despite being subject to the waiting period for the exit queue of the validator on Ethereum, has pledged to return all Ether in the network to their U.S. customers. Nansen data suggests that the net staking balance as of June 10th 2021 is down 97,510 ETH due to the Shapella upgrade. Currently, 17.4 million Ether is staked (excluding any rewards) on Ethereum, representing 15% of the total Ether supply.

The Shanghai upgrade is a crucial step for Ethereum on its roadmap to becoming the world's most widely used cryptocurrency platform. As a result of the upgrade, Ethereum users are now able to access and claim their staked Ethereum along with any accumulated returns. Although Kraken is subject to the waiting period of the validator exit queue on Ethereum, they have taken responsibility to ensure that all US Ether holders can receive what they are entitled to. The net staking balance suggests a decline which is encouraging for Ether’s liquidity and incentivising staking rewards.



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