Shanghai Upgrade Ethereum Did Not Deliver The Expected Boost

Ethereum’s highly anticipated Shanghai upgrade, which was implemented in April, has not delivered the expected boost in network activity, as reported by JPMorgan.

Ethereum shows Post-Upgrade Metrics Decline

Despite the shift from proof-of-work (PoW) to proof-of-stake (PoS) with the Merge upgrade, the report reveals a decline in key metrics. Daily transactions have fallen by 12%, daily active addresses dropped nearly 20%, and the total value locked (TVL) in decentralized finance (DeFi) on the blockchain has decreased by almost 8%.

JPMorgan points to a combination of “bearish forces” over the past year, including the collapse of Terra and FTX, regulatory crackdowns in the U.S., and a shrinking stablecoin ecosystem, potentially overshadowing the positive effects of the Shanghai upgrade.

Staking and Centralization Concerns

While staking has increased by 50% since the Shanghai upgrade, concerns linger about the high prevalence of liquid staking protocols, like Lido, and the potential centralization risks they pose. JPMorgan highlights the potential for a meaningful increase in Ethereum network activity with the upcoming EIP-4844 upgrade, also known as Protodanksharding, expected to roll out in the fourth quarter of this year. However, it acknowledges that ongoing bearish crypto market forces could continue to be a challenge.