{"id":69664,"date":"2023-10-06T20:02:36","date_gmt":"2023-10-07T00:02:36","guid":{"rendered":"https:\/\/ifintechworld.com\/markets\/crypto\/ethereums-centralization-increased-post-merge-and-shanghai-upgrades\/"},"modified":"2023-10-06T20:02:39","modified_gmt":"2023-10-07T00:02:39","slug":"ethereums-centralization-increased-post-merge-and-shanghai-upgrades","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=69664","title":{"rendered":"Ethereum’s Centralization Increased Post Merge and Shanghai Upgrades"},"content":{"rendered":"
\n

Ethereum’s recent surge in ether (ETH) staking, spurred by the Merge and Shanghai upgrades, has raised concerns surrounding centralization and reduced overall staking yields, according to a Thursday report by JPMorgan.<\/p>\n

Despite decentralized alternatives like Lido’s liquid staking platform, Ethereum’s increasing centralization poses risks to the network’s security and decentralization ethos.<\/p>\n

\u201cMany in the crypto community had seen Lido, a decentralized liquid staking platform as a better alternative compared to the centralized liquid staking platforms associated with centralized exchanges,\u201d wrote analysts led by Nikolaos Panigirtzoglou.<\/p>\n

Lido has individually made efforts to decentralize by dividing its staked ETH among multiple node operators.<\/p>\n

However, the report underscored the risks associated with centralization, including the potential for a small number of liquidity providers or node operators acting as single points of failure, vulnerable targets for attacks, or collaborators forming oligopolies detrimental to the community.<\/p>\n

The rise of liquid staking has also introduced the risk of rehypothecation, where liquidity tokens are reused as collateral across multiple decentralized finance (DeFi) protocols simultaneously.<\/p>\n

\u201cRehypothecation could then result in a cascade of liquidations if a staked asset drops sharply in value or is hacked or slashed due to malicious attack or a protocol error,\u201d the note said.<\/p>\n

Moreover, the report noted that the increased staking activity has diminished the attractiveness of ether from a yield perspective, particularly when compared to rising yields in traditional financial assets. \u00a0<\/p>\n

Ethereum’s Real Yield<\/h2>\n

Ethereum’s total staking yield has declined from 7.3% before the Shanghai upgrade to approximately 5.5%, reflecting the changing landscape of crypto investments amid evolving market dynamics.<\/p>\n

According to YCharts, the yield rate for 2-year US treasuries has risen to over 5%, in line with rising interest rates at large.<\/p>\n

Though staking is technically accessible to anyone, one must hold 32 ETH ($52,000) to set up a staking node and enter the staking arena from scratch. Users with fewer holdings must access ETH staking through a centralized staking provider that takes the financial and technical burden off of their user\u2019s shoulders in exchange for a cut of their profits.<\/p>\n

Lido is currently the largest of such providers, controlling 8.9 million ETH of the total 30.7 million ETH locked in the network\u2019s staking contract.<\/p>\n

Another set of centralized firms including Coinbase, Kraken, and Binance collectively control over 5 million staked ETH, according to Glassnode.\u00a0
\u00a0<\/p>\n<\/p><\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Ethereum’s recent surge in ether (ETH) staking, spurred by the Merge and Shanghai upgrades, has raised concerns surrounding centralization and reduced overall staking yields, according to a Thursday report by JPMorgan. Despite decentralized alternatives like Lido’s liquid staking platform, Ethereum’s increasing centralization poses risks to the network’s security and decentralization ethos. \u201cMany in the crypto […]<\/p>\n","protected":false},"author":1,"featured_media":69665,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[243],"tags":[83],"class_list":["post-69664","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-crypto","tag-featured"],"yoast_head":"\nEthereum's Centralization Increased Post Merge and Shanghai Upgrades | iFintechWorld<\/title>\n<meta name=\"description\" content=\"Ethereum's recent surge in ether (ETH) staking, spurred by the Merge and Shanghai upgrades, has raised concerns surrounding centralization and reduced\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link 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