Around a year ago, Ethereum underwent a significant transformation with the Shanghai upgrade, which aimed to strengthen the DeFi ecosystem and enhance network activity. However, recent findings from JPMorgan suggest that the upgrade has not lived up to expectations. This article delves into the key insights provided by JPMorgan’s analysis of Ethereum’s post-upgrade performance.
The Shanghai Upgrade
The Shanghai upgrade marked a pivotal moment for Ethereum as it transitioned from a proof-of-work (PoW) to a proof-of-stake (PoS) consensus mechanism. The primary goals were to reduce energy consumption and increase network activity. However, JPMorgan’s report paints a different picture.
Since the upgrade, Ethereum has witnessed a 12% drop in daily transactions, signaling a decrease in overall network activity. Moreover, the number of daily active addresses on the blockchain has fallen by nearly 20%, suggesting diminished user engagement and participation. Even the Total Value Locked (TVL) in DeFi has experienced an 8% slump.
External Influences
JPMorgan’s analysts point to external factors in the crypto environment as potential culprits for Ethereum’s lackluster performance. Bearish forces in the crypto market, coupled with setbacks in projects like Terra and FTX over the past year, have created uncertainty and caution among investors and users. Regulatory actions in the United States have added to this atmosphere of uncertainty.
A significant concern lies in the decline of stablecoin supply within the Ethereum ecosystem. Stablecoins play a pivotal role in providing liquidity and facilitating trading. A reduced supply can have adverse effects on network activity and DeFi protocols, contributing to the observed decline.
Despite an increase in staking activity by 50% post-Shanghai upgrade, Ethereum faces concerns about centralization. Liquid staking protocols like Lido have gained prominence, raising concerns about power concentration within the network.
Optimism for the Future
Despite the challenges, there is hope on the horizon for Ethereum. An upcoming upgrade known as EIP-4844, or Protodanksharding, is scheduled for implementation in the fourth quarter of this year. EIP-4844 aims to address the shortcomings observed post-Shanghai upgrade, with a focus on enhancing scalability, increasing transaction throughput, and improving overall network performance.
However, JPMorgan’s analysts caution that the persisting bearish forces in the cryptocurrency market may still pose challenges for Ethereum’s resurgence. The road ahead remains uncertain, but the Ethereum community eagerly awaits the potential positive impacts of the forthcoming upgrade.