Shanghai Upgrade Fails to Attract Institutional Interest in Ethereum, According to J.P. Morgan
The recent Shanghai upgrade for Ethereum was expected to bring in institutional interest by allowing the withdrawal of staked Ether. However, an analysis by J.P. Morgan reveals that the blockchain network has not met these expectations. Daily transactions, active user addresses, and the total value locked in DeFi platforms have all seen a decline.
Ethereum’s Performance Post-Shanghai Disappoints
J.P. Morgan’s team, led by Nikolaos Panigirtzoglou, observed that while the shift from proof-of-work (PoW) to proof-of-stake (PoS) has reduced energy consumption, network activity has not increased as anticipated. Although the amount of Ether staked has risen by 50%, it has not translated into higher network activity.
Factors Dampening Ethereum’s Performance
Several factors could be contributing to Ethereum’s underperformance. The collapse of crypto platforms FTX and Terra/Luna, diminishing interest from institutional investors, regulatory uncertainties in the US, and a decrease in venture capital funding are among them.
Inconsistent Results for Layer-Two Protocols
Layer-two (L2) protocols like Polygon, Arbitrum, and Optimism have shown inconsistent results since the Shanghai upgrade. While Optimism has seen increased activity, Arbitrum has experienced a decline, and the total value locked on both L2 networks has decreased.
Growth in Staking Raises Centralization Concerns
Staking participation has surged by 50%, but this growth raises concerns about centralization. Dominance in the liquid staking market by protocols like Lido is a particular worry.
Ethereum Still Faces Scalability Challenges
Despite the upgrades, Ethereum continues to struggle with scalability. Transaction costs remain high due to network activity levels, with average gas fees reaching as high as 155 gwei in the past year.
Ethereum Co-founder Highlights Resistance to Governmental Interference
In an interview, Ethereum co-founder Vitalik Buterin emphasized that the transition to a proof-of-stake framework enhances Ethereum’s resistance to government interference. He also noted that Ethereum has become an autonomous ecosystem capable of operating without his or the Ethereum Foundation’s involvement.
Hot Take: Shanghai Upgrade Fails to Boost Ethereum’s Institutional Interest
The highly anticipated Shanghai upgrade for Ethereum has not been able to attract institutional interest as expected. Despite reducing energy consumption and increasing staking participation, the network’s performance indicators have declined. Factors such as platform collapses, waning investor interest, regulatory uncertainties, and funding decreases have dampened Ethereum’s performance. Additionally, layer-two protocols have shown inconsistent results, raising concerns about centralization in the staking market. Scalability challenges and high transaction costs remain persistent issues for Ethereum. However, the transition to a proof-of-stake framework strengthens its resistance to governmental interference. Despite these challenges, Ethereum has matured into a self-sustaining ecosystem capable of independent operation.
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