Ethereum’s Network Activity Declines Post-Upgrade
About a year ago, Ethereum underwent the Shanghai upgrade in an effort to boost network activity and strengthen the DeFi ecosystem. However, a recent report from JPMorgan suggests that the upgrade has not lived up to expectations, as there has been an overall decrease in the network’s activity since then.
The Shanghai upgrade marked a significant milestone for Ethereum by transitioning it from a proof-of-work (PoW) to a proof-of-stake (PoS) consensus mechanism. The goal was to reduce energy consumption and increase network activity. However, JPMorgan’s analysis reveals that Ethereum’s network activity has declined following the hard fork.
According to the report, daily transactions on the Ethereum network have dropped by approximately 12% since the upgrade. The number of daily active addresses on the blockchain has also fallen by nearly 20%, indicating a decrease in user engagement. Additionally, Total Value Locked (TVL) in DeFi has witnessed an 8% slump.
JPMorgan’s analysts believe that external factors in the crypto market may have influenced Ethereum’s performance after the Shanghai upgrade. Bearish forces in the market, setbacks in projects like Terra and FTX, and regulatory actions in the United States have created uncertainty among investors and users.
Another challenge for Ethereum is the decline in stablecoin supply, which is crucial for liquidity and trading within the ecosystem. A decreased stablecoin supply can negatively impact network activity and DeFi protocols.
Furthermore, concerns about centralization persist despite the increase in staking activity since the Shanghai upgrade. Liquid staking protocols like Lido have gained prominence, raising concerns about power concentration within the network.
Analysts Optimistic Over Upcoming Upgrade
Despite these challenges, JPMorgan analysts remain hopeful for Ethereum’s future. The blockchain is preparing for another upgrade called EIP-4844, or Protodanksharding, scheduled for implementation in the fourth quarter of this year.
EIP-4844 aims to address the shortcomings observed after the Shanghai upgrade by improving scalability, increasing transaction throughput, and enhancing overall network performance.
However, JPMorgan’s analysts caution that ongoing bearish forces in the cryptocurrency market may still pose challenges even with the potential positive impact of this upgrade.
Hot Take: Ethereum Struggles with Post-Upgrade Performance
The Shanghai upgrade was expected to bring significant improvements to Ethereum’s network activity and DeFi ecosystem. However, a recent report by JPMorgan reveals that the upgrade has not met expectations. Daily transactions, daily active addresses, and Total Value Locked in DeFi have all experienced declines since the upgrade.
External factors such as market bearishness and regulatory actions have contributed to Ethereum’s underperformance. Additionally, a decrease in stablecoin supply and concerns about centralization further challenge the network.
Despite these setbacks, there is hope for Ethereum with the upcoming Protodanksharding upgrade. This upgrade aims to address previous shortcomings and improve scalability and network performance. However, ongoing bearish forces in the crypto market may continue to pose challenges for Ethereum’s success.
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