Learn: Next Ethereum Upgrade — Shanghai Upgrade

The Merge is finally here.
While one might think that the vast chunk of innovation is behind us, the Merge is just part one of five in Ethereum’s roadmap. These five parts are often referred to as the five “-urges” of Ethereum: The Merge, The Surge, The Verge, The Purge, and The Splurge.
ETH Roadmap (Source: Vitalik Buterin as of December 2021. GSR. Note that the illustration reads by time from left to right, development across the five sections of the roadmap occurring in parallel. However, the roadmap is from year-end and remains fluid.)
Shanghai Upgrade, the first major update since Ethereum’s consensus switched to proof-of-stake (PoS) after the main net and Beacon Chains merged, is expected to take place in early 2023.
The Ethereum Shanghai upgrade is another critical update set to introduce elemental changes in the blockchain’s EVM functionalities as it nears the full Ethereum 2.0 release.

What is Shanghai Upgrade?

On 14 Oct 2022, Friday, the Ethereum Foundation announced the launch of Shandong testnet, the pre-Shanghai testnet that will serve as a testing ground for numerous Ethereum Improvement Proposals (EIPs). In the Shandong testnet, the developers will build,
As stated by developer Tim Beiko, the Shanghai version addresses three key issues surrounding Ethereum. It introduces changes to the EVM object format, beacon chain withdrawals, and L2 fee reductions.
Among all the upgrades, the most anticipated one would be the introduction of EIP-3540.

EVM Object Format

EIP-3540, also known as the Ether Virtual Machine (EVM) Object Format, is the developer-oriented underlying mechanism of Ether that defines the rules of governing how blocks interact on the network.
In the past two years, Ethereum has not done any updates to the EVM due to the concerns and uncertainties that might occur after the Merge. It is believed that updating the EVM before the Merge would have led to a significant increase in the complexity.
The core element of this update is that it separates code from data, which can be very beneficial for on-chain validators. In addition to separation, EIP-3540 introduces a new contract code section that helps handle and resolve complex functions such as account abstraction, control flow in the EVM, and EIP-3074.
“From my perspective, EIP-3540 is the most significant upgrade proposed for Shanghai. It’s a further step toward interoperability within the Ethereum ecosystem. Currently, layer-2 networks on Ethereum use a cumbersome code validation process. EIP-3540 separates code and data, making that process more efficient. It’s especially good news for the growing ecosystem of Polygon Supernets — Decentralized application chains built on Polygon Edge.” — Galen Moore, content lead at Axelar
Another expected proposal is EIP-4895, which will allow sETH and earned rewards withdrawals via the Beacon Chain. In order to ensure network stability, validators with sETH currently cannot withdraw funds directly.


On the other hand, there will also be a “proto-danksharding” update.
Proto-danksharding is related to rollups scalability.
Rollups is an ethereum network scaling tool that aggregates a collection of transactions into a single unit, which is then presented as a separate transaction is presented to the Ethernet blockchain, thus solving the problems of slow transaction processing and high gas costs on the main Ethernet network.
Proto-danksharding can be seen as a preliminary version of danksharding, in which only the cell block data is sampled to verify the large amount of data on Rollups. “Danksharding” gets its name from its creator and Ethereum Researcher—Dankrad Feist, and it indicates a transition from the traditional sharding system to this paradigm shift, which is being colloquially called the “Scalability Killer”. (The Tie Research​
Put it shortly, proto-danksharding could reduce the cost of gas on the rollup chain and also make it easier for Rollup to scale massively, while transaction costs would also be significantly reduced. However, while danksharding is extremely attractive to Layer 2 users, and the upgrade can eliminate gas fees and reduce transaction times, the development work requires a lot of effort and time.