Ethereum Shanghai Upgrade Fails to Impress: JP Morgan
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Ethereum, the world’s foremost smart contract blockchain, has witnessed a decline in network activity since its highly anticipated Shanghai upgrade in April.
According to a recent research report by JPMorgan, this downturn is notable despite the upgrade’s successful facilitation of the withdrawal of staked ether (stETH), Ethereum’s native cryptocurrency. These tokens have remained locked since Ethereum transitioned from proof-of-work (PoW) to proof-of-stake (PoS) in September 2022.
JPMorgan says Ethereum's activity post-Shanghai upgrade has been 'disappointing'
— Frank Chaparro (@fintechfrank) September 22, 2023
According to CoinDesk, the report highlights that the Shanghai upgrade did have positive impacts on Ethereum’s ecosystem. It notably improved energy efficiency, ensured a smoother supply of ether and bolstered the staking mechanism. However, it failed to breathe life into critical metrics such as the daily transaction count, daily active addresses, and the total value locked (TVL) within decentralized finance (DeFi) applications on the blockchain.
JPMorgan’s analysts attribute this decline in network activity to several bearish factors from the past year. Notably, the catastrophic collapses of Terra and FTX, two major DeFi platforms, alongside the United States’ regulatory clampdown on crypto and the shrinking stablecoin landscape.
The report also casts a shadow of doubt on Ethereum’s staking system’s centralization, as a considerable share remains concentrated in liquid staking protocols like Lido. Liquid staking enables users to stake their ether and receive tokens representing their stake, which can then be employed in various DeFi applications.
Ethereum to See Improved Scalability with Protodanksharding
JPMorgan, however, suggests a brighter outlook for Ethereum’s network activity with the impending EIP-4844 upgrade, dubbed Protodanksharding, scheduled for the fourth quarter of this year. This upgrade is poised to significantly enhance Ethereum’s scalability and security by introducing a new layer of sharding. Sharding will effectively break down the blockchain into smaller, more nimble segments capable of processing transactions faster and at lower costs.
