Withdrawals are the missing piece in the validator lifecycle, a feature under development since Ethereum’s Beacon Chain launched in December 2020. Now, withdrawals are set to arrive with the Shanghai Upgrade (expected in early 2023). As this upgrade approaches, it’s essential to understand what withdrawals are, how they function, and how to use this new feature.
The Evolution of Ethereum Withdrawals
When the Beacon Chain launched in December 2020, it was impossible to transfer assets from the consensus layer (Beacon Chain) to the execution layer (Ethereum mainnet). While validator balances accumulated on the Beacon Chain, users couldn’t access these rewards because withdrawals weren’t technically feasible.
Over time, Ethereum’s architecture evolved to accommodate new research, shifting toward a Layer 2-centric scaling model while largely maintaining the execution layer’s original structure. In September 2022, the Merge combined the execution and consensus layers, embedding execution data within Beacon Chain blocks. This integration made it possible to transfer assets from the consensus layer to the execution layer—one example being validator rewards.
What Do Validators Do?
Since Beacon Chain’s inception, validators have been responsible for:
– Proposing new blocks
– Attesting to blocks (voting on proposed blocks to ensure consensus)
These actions earn validators rewards. Initially, the Beacon Chain had only 20,000 validators, but today, over 520,000 active validators secure the network. From December 2020 to September 2022, the Beacon Chain solely maintained its own security, paving the way for the Merge. Post-Merge, Ethereum’s security now relies entirely on validators.
Where Do Validator Rewards Go?
Since the consensus layer lacks execution capabilities, accumulated ETH couldn’t be transferred between accounts. The Beacon Chain doesn’t even have traditional accounts—only validator balances exist. This means that while rewards have grown steadily over the past two years, there was no way to withdraw them.
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Collectively, the Beacon Chain has generated over 1 million ETH in rewards. Individual validator rewards vary based on factors like:
– Time spent actively validating
– Block proposal frequency
Most validators have earned less than 2 ETH, while some have accumulated up to 5 ETH. Although these rewards are recorded on the Beacon Chain, they couldn’t be accessed on the execution layer—until now.
Note: Post-Merge, block proposers also earn transaction fees, paid directly on the execution layer.
How the Shanghai Upgrade Enables Withdrawals
The Shanghai Upgrade introduces a mechanism to transfer rewards from the consensus layer to the execution layer. Each execution block now includes data for up to 16 withdrawals, structured as follows:
| Component | Description |
|---|---|
| Withdrawal index | Unique identifier for tracking withdrawals |
| Validator index | The validator’s identifier on the Beacon Chain |
| Address | The Ethereum address receiving the withdrawal |
| Amount | ETH transferred (in Gwei) |
Withdrawals are processed automatically when blocks are added to the execution chain. Importantly:
– Withdrawals are not transactions (they don’t consume gas).
– No smart contracts are triggered upon receipt.
– Balances update immediately after block processing.
Where Does the ETH Come From?
While validators initially deposit 32 ETH to activate, withdrawals do not tap into this deposit. Instead, rewards come from newly minted ETH (protocol issuance), ensuring withdrawals are always funded—even if total withdrawals exceed deposits.
The Withdrawal Clock Mechanism
Validators are processed sequentially via a withdrawal clock, which cycles through all active validators. Each block includes up to 16 withdrawals based on:
- Active Validators: If a validator has >32 ETH and type 1 withdrawal credentials, the excess is withdrawn.
- Exited Validators: If a validator has type 1 credentials and a non-zero balance, the entire balance is withdrawn.
The clock completes a full cycle roughly every 4.5 days (given ~520,000 validators and 7,200 blocks/day).
Upgrading Withdrawal Credentials
To withdraw, validators must have type 1 withdrawal credentials (linked to an Ethereum address). Currently, ~40% of validators have type 1 credentials; the rest use type 0 (BLS-based). The Shanghai upgrade enables switching from type 0 to type 1 via a signed operation:
| Field | Description |
|---|---|
| Validator index | The validator’s ID |
| Withdrawal BLS public key | Current BLS credentials |
| Execution address | New withdrawal address |
| Signature | Signed by the BLS private key |
👉 Learn how to upgrade withdrawal credentials
Choosing an Execution Address
Since credential changes are irreversible, ensure:
– Control over the private key.
– Security trade-offs:
– Single address: Easier management, lower gas costs.
– Multiple addresses: Enhanced privacy and security.
Creating and Broadcasting the Operation
- Gather chain data (requires an online node).
- Transfer data offline (USB recommended for security).
- Sign the operation (requires the BLS private key).
- Broadcast the signed operation via a consensus node.
FAQs
Q: When will withdrawals be available?
A: With the Shanghai Upgrade, expected in early 2023.
Q: How long does a withdrawal take?
A: Typically 1–2 hours, but may extend to 4 days during high demand.
Q: Can I withdraw my initial 32 ETH stake?
A: Not yet. Currently, only excess rewards (>32 ETH) are withdrawable.
Q: What happens if I don’t upgrade to type 1 credentials?
A: You cannot withdraw until credentials are upgraded.
Q: Are withdrawals taxable?
A: Tax implications vary by jurisdiction—consult a professional.
Conclusion
The Shanghai Upgrade fulfills Ethereum’s long-awaited promise of staking withdrawals, completing the validator lifecycle. By enabling seamless reward access and credential upgrades, Ethereum strengthens its security and usability.
As the network grows, validators play an even more critical role in maintaining Ethereum’s decentralized future.
For further reading, explore our guides on Ethereum staking and validator best practices.