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JPMorgan, one of the biggest financial institutions in the world, estimates that the arrival of the next Ethereum upgrade, codenamed Shanghai, will bring more investors to stake their funds in the protocol. The firm believes that this number might reach 60% of the ether issued, a number already staked in other blockchain networks.

JPMorgan Expects Ethereum Shanghai Upgrade to Bring More Funds to the Network

A recent report by JPMorgan has revealed that the upcoming Shanghai upgrade, slated to be applied in March, might bring more capital to the network. The investment bank estimates that Shanghai will bring Ethereum’s stake percentage to the number of other popular proof of stake networks have, more than four times the ether currently staked.

The report explained:

Assuming the staking 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 yield in ETH would fall from 7.4% today to around 5%.

14% of the issuance of ether is currently staked, and cannot be withdrawn until the Shanghai update is finally applied. Other protocols, like Solana and Cardano, have approximately 70% of their issuance staked, according to data from Staking rewards.

New Staking Trends

JPMorgan also elaborated on the destiny of these new funds that they estimate new investors will be staking. The firm believes that most of these funds will go toward platforms such as Lido, which present several benefits when compared to maintaining hardware infrastructure.

The report states these platforms “give liquidity to staking assets that would otherwise be locked into staking contracts by providing an equal amount of derivative token in exchange for ETH, which can be traded.”

As the report suggests, these derivative tokens can be also positioned in different decentralized finance platforms to compound earnings by also staking them. Also, they facilitate bypassing the requirement of staking at least 32 ether, allowing small investors to also participate in protocol validation tasks in staking pools.

Exchanges like Coinbase and Kraken also offer staking services for Ethereum, but regulatory headwinds might thwart these services in the U.S. Kraken recently stopped its staking programs in the U.S. and was fined $30 million by the SEC to settle on charges of offering unregistered staking services. However, users in foreign countries will also be able to stake their ethereum tokens using these services.

This new configuration of the staking panorama, could result in an even higher concentration of funds in fewer hands, bringing concerns about the resilience of these platforms against attacks in the future.

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Sergio Goschenko

Sergio is a cryptocurrency journalist based in Venezuela. He describes himself as late to the game, entering the cryptosphere when the price rise happened during December 2017. Having a computer engineering background, living in Venezuela, and being impacted by the cryptocurrency boom at a social level, he offers a different point of view about crypto success and how it helps the unbanked and underserved.

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