According to JPMorgan’s latest analysis report, Ethereum’s Shanghai upgrade conducted in April fell short of expectations in terms of network activity. The Shanghai upgrade provided validators the opportunity to withdraw staked ether locked in Ethereum. However, following this upgrade, Ethereum’s network activity lagged behind expectations.
The decline in Ethereum’s network activity could be attributed to various factors, including the challenges faced by FTX and Terra, US crypto regulations, decreased interest from institutional investors, and a weakening of venture capital funds.
“While the shift from proof-of-work to proof-of-stake that resulted from the Merge upgrade meant that the energy consumption for the Ethereum network collapsed by more than 99%, the Ethereum supply is shrinking and staking rose sharply (with the amount of ether staked up by 50% since the Shanghai upgrade), the increase in network activity has been rather disappointing.”
Ethereum Layer 2 Networks and Upcoming Upgrades
Layer 2 solutions in Ethereum continue to display mixed results. Specifically, while Optimism is witnessing an increase in activity, a decline has been observed in Arbitrum. Furthermore, the total locked value (TVL) of both platforms has recently experienced a drop.
According to The Block, JPMorgan analysts suggest that this decline in activity on the Ethereum network may also be connected to centralization concerns related to liquid staking protocols, especially those with a significant share like Lido.
Ethereum’s EIP-4844 Upgrade
The crypto industry is currently awaiting Ethereum’s EIP-4844 upgrade. This upgrade aims to make the Ethereum chain more efficient and could benefit Layer 2 solutions, which are expected to package transactions before sending them back to the main chain.
However, the exact timing of this upgrade remains uncertain. Initially planned for the fourth quarter of this year, the upgrade could be postponed until the beginning of next year.