Ethereum’s Shanghai Upgrade Fails to Spark Network Activity Surge, Says JPMorgan

According to a new study report by JPMorgan (JPM), the much-awaited Ethereum Shanghai upgrade, which was deployed in April, has not resulted in the anticipated boom in network traffic. The results have been less robust than expected, despite the update bringing about important improvements, such as a switch from proof-of-work (PoW) to proof-of-stake (PoS).

Disappointing Post-Shanghai Metrics

JPMorgan analysts, under the direction of Nikolaos Panigirtzoglou, have emphasized a number of crucial criteria that indicate a dismal post-Shanghai performance. Since the update, there have been 12% fewer daily transactions on Ethereum, nearly 20% fewer daily active addresses, and an over 8% reduction in the total value locked (TVL) in decentralized finance (DeFi) on the blockchain.

All of these indicators point to a lack of the anticipated increase in network activity following the Shanghai upgrade.

Bearish Forces vs. Shanghai Upgrade

According to the JPMorgan analysis, a number of “bearish forces” during the last year could have obscured the benefits of the Shanghai upgrade. The failures of Terra and FTX, the American governmental crackdown, and the dwindling stablecoin ecosystem are among these pessimistic factors.

While Ethereum staking has increased by 50% after the Shanghai update, enhancing network security, worries about centralization have surfaced. The paper specifically mentions that the “share of liquid staking protocols such as Lido remains uncomfortably high,” raising concerns about the degree of network centralization.

Looking Ahead

There is still optimism despite the underwhelming post-Shanghai performance. The paper emphasizes the imminent Protodanksharding update, also known as Ethereum Improvement Proposal (EIP)-4844, which is planned for this year’s fourth quarter. There is hope that the network activity may grow as a result of this update. The research does, however, issue a warning that “continued bearish crypto forces remain a headwind.”

Protodanksharding, also known as EIP-4844, is anticipated to bring about modifications that might revitalize Ethereum’s ecosystem. The Ethereum community is nonetheless upbeat about the network’s future even though the Shanghai update may not have produced the desired effects.