In a recent revelation, JPMorgan analysts have expressed their concerns over the lackluster performance of the Ethereum blockchain's Shanghai upgrade. Despite high hopes, this upgrade, which took place in April, hasn't amplified Ethereum's prowess as the leading platform for smart contracts and decentralized finance (DeFi) applications. This insight was further amplified in a research report highlighted by CoinDesk.
Immediate effects post-upgrade were unimpressive, with Ether's price barely surging by 3%. While the staking ecosystem flourished and Ether's supply saw a decrease, the network activity left much to be desired. A notable concern was the 10% dip in the Total Value Locked (TVL) on the Ethereum mainnet post-upgrade. Additionally, daily active addresses dwindled by 20%, and the network processed about 12% fewer transactions.
The overarching sentiment is that several bearish events in 2022, including US regulatory interventions, the Terra ecosystem's collapse, the FTX crypto exchange's bankruptcy, and a deflating stablecoin market, might have overshadowed the Shanghai upgrade's anticipated benefits.
Highlighting another potential concern, JPMorgan's report emphasized the dominant share of Lido and other DeFi platforms in liquid staking, alluding to centralization risks. Nonetheless, the silver lining remains the 50% surge in deposits post-upgrade.
Ethereum's pivot to Ethereum 2.0 in September 2022, shifting from Proof of Work (PoW) to Proof of Stake (PoS), was a transformative move for the network, ushering in energy efficiency. However, it fell short of the industry's expectations, evident from the transaction rate's decline.
Yet, all hope is not lost. The impending EIP-4844 upgrade, slated for the year's last quarter, might be Ethereum's beacon, potentially reviving network activity and restoring faith in the platform, concludes the JPMorgan report.
