ETH Shanghai upgrade will open staking redemption, vETH 2.0 will be launched soon

Bifrost Finance
4 min readJan 10, 2023

On September 15, 2022, Vitalik Buterin, the co-founder of Ethereum, tweeted, “We finalized! (Ethereum merger)!” and proclaimed this is an important moment for the Ethereum ecosystem. The transition of the Ethereum mainnet from Proof of Work (PoW) to Proof of Stake (PoS) is called “The Merge”. This also means that the era of large-scale video card farming is over.

However, The Merge did not open the redemption feature of the beacon chain Staking ETH from users. At Ethereum’s developer meeting on December 8, the Ethereum community finally decided that redemption will be officially opened after the ‘Shanghai Upgrade’ in March 2023. In addition to enabling redemptions, the Shanghai Upgrade introduces several performance improvements to Ethereum, such as lower Rollup fee consumption, a more robust smart contract infrastructure and more.

From a Token Economic Model perspective, ETH will shift from inflation to deflation due to a change in net issuance to negative from positive after the merger. The reduction in the total supply of tokens will cause deflationary pressure. After the merger, the Ethernet chain will no longer need miners to protect the chain; instead, it’ll rely on staked ETH. The staked ETH lock’s part of Ethereum’s liquidity (12% and growing), creating a positive ETH price movement.

While the Shanghai upgrade may bring a short-term sell-off to ETH, the upgrade brings a host of exciting features that keep the long-term fundamentals of ETH looking good.

The Shanghai upgrade is consequential toward greater scalability, security, and sustainability. In the future, Ethereum will achieve higher performance, accommodate a richer ecosystem, and continue to improve the fundamentals of Ethereum.

Liquid Staking

Liquid staking is depositing cryptocurrency for lock-up while maintaining access to them and collecting rewards. Liquid staking funds are accessible in an escrow, as opposed to proof-of-stake (PoS) staking, which locks money in a protocol.

There are two types of liquid stakings: custodial and non-custodial. In custodial, $ETH owners hand over their crypto to a centralized institution, which stakes on their behalf and issues a redemption certificate. The centralized model has flaws that may lead to security risks.

Bifrost provides a non-custodial staking method, where a decentralized application collects and stakes the user’s $ETH and issues a redemption certificate — vETH. Once redeemable, users destroy the vETH through the program to unlock their ETH. The non-custodial model mitigates third-party interference in handling staked tokens.

vETH Minting entrance:

You can trade vETH at any time in the decentralized exchange Zenlink on Moonriver and enjoy a high-efficiency and low-gas trading experience. Before that, you need to transfer vETH to Moonriver via Multichain (AnySwap).

Hold vETH and reap triple benefits

Buy vETH

The current vETH price typically fluctuates between 0.85 ETH ~ 0.89 ETH due to factors such as Mint Drop subsidies, market sentiment, the uncertainty of redemption times, liquidity size, and more. If you are bullish on the fundamentals of $ETH, then buying vETH is a better investment opportunity than buying ETH. You could buy a 10 ETH redemption for 8.5 ETH and cash in your redemption rights when Ether officially opens redemptions.

Holding vETH

vETH is an interest-bearing asset that generates Staking revenue for as long as you hold it. You can claim a reward at any time in the Bifrost application interface. After the Ethernet merger, vETH synchronizes the additional revenue earned by the running nodes. In addition to the base Staking revenue, vETH includes the Maximum Extractable Value (MEV) and Gas Fee, increasing the combined annualized rate from 3.5% before the merger to 4.2% after the merger.

Liquidity Farming

Earn from transaction fees by becoming a liquidity provider (LP) for vETH/ETH on the Zenlink platform. Based on historical data, the expected annualized return on vETH liquidity mining is approximately 10 %.

Operation guide

How to buy vETH?

Connect to MetaMask wallet, switch to Moonriver network, access Zenlink ETH/vETH trading pair, and exchange ETH for vETH.

How to get the staking reward?

In order to integrate vETH into the SLP protocol standard, vETH will upgrade the contract to distribute staking reward according to the exchange rate increase (refer to vDOT/vKSM), and the vETH income will be calculated normally during the contract upgrade period.

How to participate in liquidity farming?

On the Zenlink ETH/vETH interface, click Add Liquidity in the upper right corner, you can also choose to provide ETH and vETH in pairs, or only vETH.

About Bifrost

Bifrost is a cross-chain network built on a substrate that gives liquidity to staked assets as staking derivatives. It is based on open-source platforms, primarily as a Polkadot parachain. Because of Bifrost’s cross-chain functionality, others can create integrations to enable staking on other PoS networks.

Bifrost offers vToken (Staking Derivatives Voucher Token) as a DeFi project in the Polkadot ecosystem, allowing users to exchange PoS tokens to vToken and gain liquidity and staking incentives via protocol at any moment.

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Bifrost Finance

Bifrost Finance is a parachain designed for staking’s liquidity