Upcoming Shanghai Update in Ethereum Could Reduce User Gas Fees

Ethereum’s upcoming Shanghai update could see Ethereum users spend considerably less on gas fees.

Ethereum’s Shanghai update is the next major update on the Ethereum roadmap after the Merge. The merge saw Ethereum shift from Proof-of-Work to Proof-of-Stake. This update is anticipated to occur sometime in the last two quarters of 2023. The Shanghai update may allow ETH hodlers that have staked ETH for the development of Ethereum 2.0 to finally withdraw their staked tokens.

Also, the Shanghai update aims to improve scalability issues in the network. Some Ethereum Improvement Proposals (EIPs) in the Shanghai update are EIP-3855, EIP 3860, and EIP-3651. The latter sees Ethereum reduce network fees for ETH users.

EIP-3651 primarily eliminates unnecessary fees from failed transactions. Traditionally, initial transactions cost more fees because the network needs to stimulate. However, with the EIP-3651, the network no longer needs an initial transaction to start “warming up”.

Block builders such as Flashbots, validators, and traders, will benefit from the update given the reduced costs and the elimination of failed transaction fees. The reason why you have to pay fees for failed transactions in the first place is that they need to be verified in the network too.

The Shanghai update testnet launched on October 18th. The final implementation phases, however, may occur sometime in the second half of next year.

Some people, however, are still not happy with the fact that there is no exact date on when the upgrade will happen. The argument here is that long-term stakers need to know how to prepare for the staked ETH withdrawals.