JPMorgan: Shanghai hard fork disappointed in Ethereum activity

Activated in April, the Shanghai upgrade to the Ethereum network appears not to have led to the expected rise in on-chain activity. CoinDesk reports, citing a JPMorgan report.

The hard fork implementation opened the possibility to withdraw staked cryptocurrency.

“Although the migration from Proof-of-Work to Proof-of-Stake as a result of The Merge led to a drop in network energy consumption by more than 99%, a contraction of ether in circulation and a sharp rise in staking activity, on-chain activity metrics proved quite disappointing,” said the bank’s analysts led by Nikolaos Panigirtzoglou.

Experts noted declines after the hard fork:

• the daily transaction count fell by 12%;
• the number of daily active addresses fell by almost 20%;
• TVL in DeFi protocols fell by about 8%.

The slowdown in activity suggests that the bearish impact of last year, including the Terra and FTX collapses, tighter US regulation and the contraction of the stablecoins segment, outweighed the potentially positive impact of Shanghai, according to JPMorgan analysts.

Despite a 50% rise in ETH staked after Shanghai, which enhances network security, the share of LSD protocols such as Lido remains alarmingly high, raising questions about centralisation, the analysts said.

In their view, hopes for a meaningful uptick in on-chain activity in Ethereum are now tied to the forthcoming implementation of EIP-4844, known as Proto-Danksharding.

The option scales the blockchain by introducing a new type of transaction for large arrays of binary data (blob) and organising their storage. This is intended to reduce gas costs for L2-решений on the basis of Rollups technology.

The EIP is included in the Deneb-Cancun package for Deneb-Cancun, which developers plan to activate during the Dencun hard fork.

During a video conference held on 21 September, Ethereum Foundation developer Tim Beiko admitted that the update planned for Q4 would be postponed to early 2024. His concerns were prompted by delays in deploying Dencun on public testnets.

ForkLog outlined the roadmap for Ethereum development in educational cards.