JPMorgan, one of the world’s largest financial institutions, estimates that the arrival of the next upgrade to Ethereum, codenamed Shanghai, will attract more investors to stake their funds on the protocol. The firm believes that this number could reach 60% of the ether issued, a number that is already staked on other blockchain networks.
JPMorgan hopes Ethereum Shanghai upgrade will attract more funds to the network
A recent JPMorgan report revealed that the upcoming Shanghai upgrade, scheduled for implementation in March, could bring more capital into the network. The investment bank estimates that Shanghai will bring Ethereum’s stake percentage to the number of other popular proof-of-stake networks, more than four times the ether currently staked.
The report explained:
Assuming the participation rate converges over time to the 60% average of other large networks, the number of validators could increase from $0.5 million to $2.2 million and the annual return in ETH it would fall from the current 7.4% to around 5%.
14% of the ether issuance is currently staked and cannot be withdrawn until the Shanghai update is finally applied. Other protocols, such as Solana and Cardano, have approximately 70% of their issuance staked, according to data of Participation Rewards.
New Staking Trends
JPMorgan also gave more details about the destination of these new funds that they estimate that new investors will bet on. The firm believes that most of these funds will go to platforms like PoolThey present several benefits compared to maintaining the hardware infrastructure.
The report states that these platforms “give liquidity to staking assets that would otherwise be locked in staking contracts by providing an equal amount of derivative token in exchange for ETHthat can be negotiated.”
As the report suggests, these derivative tokens can also be placed on different decentralized finance platforms to increase profits by staking them as well. In addition, they make it easy to bypass the requirement to stake at least 32 ether, allowing small investors to also participate in protocol validation tasks in stake pools.
Exchanges like Coinbase and Kraken also offer staking services for Ethereum, but regulatory headwinds could thwart these services in the US. Kraken recently halted its US staking programs and was fined by the SEC of $30 million to settle charges of offering unregistered staking services. However, users from foreign countries will also be able to stake their Ethereum tokens using these services.
This new configuration of the staking landscape could result in an even greater concentration of funds in fewer hands, raising concerns about the resilience of these platforms against attacks in the future.
What do you think of JPMrogan’s predictions on Ethereum staking? Tell us in the comment section below.
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