JPMorgan Makes Negative Remarks on Ethereum: Falling Short of Expectations!

• According to JPMorgan, Ethereum’s network activity has fallen short of expectations following the implementation of the Shanghai upgrade in April.
• Analysts note mixed results for Ethereum Layer 2 networks. While Optimism has seen increased activity, Arbitrum’s activity has decreased.
• The crypto industry is now looking to the EIP-4844 upgrade or protodanksharding with hopes of a significant increase in Ethereum network activity.

Analysts from JPMorgan, one of the world’s largest banks, have stated that Ethereum’s performance has not been up to par, deeming it lackluster.

JPMorgan Assesses Ethereum’s Performance

According to JPMorgan, Ethereum’s network activity has fallen short of expectations following the implementation of the Shanghai upgrade in April. JPMorgan analysts mention that energy consumption on the Ethereum network has decreased by over 99% with the Merge upgrade, and Ethereum’s supply has tightened, with a sharp increase in staking (with the amount of ether staked increasing by 50% since the Shanghai upgrade). However, they express disappointment with the increase in network activity.

Analysts point out that indicators such as Ethereum’s daily transactions, daily active addresses, and the total value locked (TVL) in decentralized finance (DeFi) protocols on the network have all declined. They suggest that the decrease in Ethereum activity could be influenced by various “downward forces” from the past year, including FTX and Terra crashes, regulatory uncertainty and crackdowns in the United States, waning institutional interest in crypto, and a decrease in venture capital funding. The Shanghai upgrade allowed Ethereum validators the option to withdraw staked ether locked in the network.

Furthermore, analysts note mixed results for Ethereum Layer 2 networks. While Optimism has seen increased activity, Arbitrum’s activity has decreased. TVL on both Arbitrum and Optimism has decreased since the end of March before the implementation of the Shanghai upgrade.

Analysts also draw attention to Ethereum’s centralization concerns, particularly addressing liquid staking protocols like Lido.

Ethereum’s EIP-4844 Upgrade

The crypto industry is now looking to the EIP-4844 upgrade or protodanksharding with hopes of a significant increase in Ethereum network activity. However, analysts believe that “ongoing downward trends continue to be a headache.”

Protodanksharding, unlike the originally planned sharding technique, is a preliminary step toward full danksharding implementation. Danksharding introduces data-containing blobs, which are temporary data packets added to blocks that can hold more data than the blocks themselves. Instead of dividing the Ethereum blockchain into multiple shard chains, danksharding introduces data-containing blobs added to blocks that can store more data.

This innovation is expected to benefit Layer 2 networks like Arbitrum and Optimism, which package transactions before sending them back to the main chain. Data blobs will not change the Ethereum block size but can potentially improve network efficiency and reduce transaction fees by creating additional temporary data space for Layer 2 aggregations.

While protodanksharding is currently scheduled for the fourth quarter of this year, this date may be pushed into the next year.