<img src="https://crypto.news/app/uploads/2023/10/crypto-news-ethereum-Core-Developers-blockchain-and-artificial-intelligence-blue-and-white-colors-blurry-backgroun.jpg” />
JPMorgan Chase &. Co. has shed light on how the decentralization of the ethereum network has decreased significantly since the Merge event and the Shanghai upgrade went live.
The rise of betting and centralization
Since the Merge and Shanghai upgrades were implemented, ethereum has seen a substantial increase in staking activities.
Staking, a process in which users lock their crypto assets to support network operations, has its advantages. According tech/2023/10/06/ethereum-has-become-more-centralized-since-the-merge-and-shanghai-upgrades-jpmorgan/?utm_term=organic&utm_source=twitter&utm_medium=social&utm_campaign=coindesk_main&utm_content=editorial” data-type=”link” data-id=”https://www.coindesk.com/tech/2023/10/06/ethereum-has-become-more-centralized-since-the-merge-and-shanghai-upgrades-jpmorgan/?utm_term=organic&utm_source=twitter&utm_medium=social&utm_campaign=coindesk_main&utm_content=editorial” target=”_blank” rel=”noopener”>to According to a CoinDesk report citing JPMorgan research, this increase in betting activity comes at a cost: centralization.
Traditionally, many in the crypto community prefer decentralized liquid staking platforms like Lido over their centralized counterparts.
Lido’s approach included adding more node operators to ensure that no single entity controlled a significant portion of the staked Ether (eth). The goal was to address concerns about centralization.
However, centralization remains a risk. A concentration of liquidity providers or node operators could act as a single point of failure or even collude to create an oligopoly, which could undermine the interests of the broader ethereum community.
ethereum, the world’s second-largest cryptocurrency, has become more centralized since the Merge and Shanghai upgrades. And JPMorgan highlights concerns about a drop in betting returns.
The threat of remortgage
Another highlight of the report is remortgaging. This complex term refers to the practice of repurposing liquidity tokens as collateral across multiple decentralized finance (DeFi) protocols simultaneously.
DeFi encompasses lending, transactions, and other financial activities carried out on blockchain.
The problem arises when the value of a staked asset drops drastically or faces a security breach or protocol error.
In such scenarios, rehypothecation could trigger a cascade of liquidations, jeopardizing the stability of the DeFi ecosystem.
Additionally, the report notes that increased staking has diminished ethereum‘s appeal from a performance perspective.
This shift is especially notable amid rising returns on traditional financial assets. The total betting return has fallen from 7.3% before the Shanghai update to approximately 5.5%.
From a different perspective, research data presented in December following ethereum‘s Merge upgrade in September 2022 reveals a significant reduction in network energy consumption, similar to the energy use of entire countries like Ireland and Austria.
This decrease in energy consumption positively contributes to environmental sustainability, aligning with broader global efforts to reduce the carbon footprint associated with blockchain technologies.
ethereum core developers have submitted an ethereum improvement proposal (EIP-7514) as part of the upcoming Dencun upgrade, which is scheduled to go live in October 2023.
This proposal aims to reduce the participation rate in Ether. The intention is to give the ethereum community more time to design a practical reward scheme for participants in the network.
eth Price Analysis
At the time of writing, the price of ethereum (eth) stands at $1,629, representing a decline of 3.4% on the weekly period.
ethereum‘s Relative Strength Index (RSI) currently stands at 40.4.
eth price is struggling to hold the $1,600 level after facing rejection at the $1,700 resistance level. Failure to hold the $1,600 level could lead to a further decline towards the $1,500 level.
