HOT NEWS! Ethereum’s Shapella upgrade is scheduled to activate on mainnet on April 12th, enabling validators to withdraw staked ETH positions since Beacon Chain launched. Beacon’s Chain was launched in December 2020 and so staked ETH withdrawals will be smoothed over several weeks to months. Since the launch, this initial 32 ETH stake plus the rewards generated from actively validating the chain have sat in each validators’ account balance, unable to be withdrawn or transferred. This will change very soon. Shapella will also introduce a new system-level operation that will push Beacon Chain validator account balances into the Ethereum Virtual Machine (EVM).
There will be two types of withdrawals once Shapella is introduced. The partial withdrawals (skimming) and full withdrawals. Partial withdrawals will occur on a routine basis, automatically withdrawing each validator’s excess stake to the specified withdrawal address. Whereas, full withdrawals, require the validator to signal a voluntary exit (or get slashed) and wait through the exit queue before going through the withdrawal queue.
Taxes will be the most important part for ETH sales. Without comments on the tax implications of ETH staking, many stakers believe their accrued rewards only become taxable once control is gained over them, leading to the view that rewards are not taxable until a liquidity event like Shapella occurs (not tax advice). Due to this, solo ETH stakers may sell a fraction of their staking income to finance these tax expenses.
While some withdrawals will certainly lead to sales, particularly for tax implications, many withdrawals will also lead to most stakers reinvesting their excess/unproductive ETH or swapping out their existing service providers with the increased flexibility of direct redemptions. Lastly, Shapella is representing a material de-risking event for stakers that envision the growth of the ETH staking populace which will be the most meaningful outcome of the upgrade in the mid-to-long term. Stay tuned for more hot news!