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JPMorgan, one of the largest financial institutions in the world, estimates that the arrival of the next Ethereum upgrade, codenamed Shanghai, will prompt more investors to stake their money in the protocol. The firm believes that this number could reach 60% of issued ether, a number that has already been played in other blockchain networks.
A recent report from JPMorgan has revealed that the upcoming Shanghai upgrade, due in March, could bring more capital to the network. The investment bank estimates that Shanghai will bring Ethereum’s ownership percentage to the number of other popular proof of stake networks, more than four times the ether currently staked.
The report explained:
Assuming the staking rate converges over time to the 60% average of other major networks, the number of validators could increase from $0.5 million to $2.2 million, and the annual return in ETH would drop from 7.4% today to around 5%.
14% of Ether issuance is currently staked and cannot be withdrawn until the Shanghai update is finally deployed. Other protocols, such as Solana and Cardano, have about 70% of the issuance stake, according to data from Staking rewards.
JPMorgan also elaborated on the fate of these new funds that it estimates new investors will bet on. The firm believes that most of these funds will go to platforms such as Lido, which offer several advantages compared to maintaining hardware infrastructure.
The report says these platforms “provide liquidity to staking assets that would otherwise be locked into staking contracts by providing an equal amount of derivative tokens in exchange for ETH, which can be traded.”
As the report suggests, these derivative tokens can also be positioned in various decentralized financial platforms to increase revenue by staking them as well. They also make it easier to bypass the requirement to stake at least 32 ether, so that small investors can also participate in protocol validation tasks in staking pools.
Exchanges such as Coinbase and Kraken also offer staking services for Ethereum, but regulatory headwinds may hinder these services in the US. Kraken recently halted its betting programs in the US and was fined $30 million by the SEC to settle allegations of offering unregistered betting services. However, users in 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 higher concentration of funds in fewer hands, raising concerns about the resilience of these platforms to attacks in the future.
What do you think of JPMrogan’s Ethereum Stake Predictions? Tell us in the comments section below.
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