JPMorgan Says Ethereum’s DeFi Dominance at Risk Due to ‘Sharding’ Delays

Analysts from the bank said that the scaling of the network might arrive too late.

Jan 6, 2022 at 1:19 p.m. UTC
Updated Jan 6, 2022 at 8:50 p.m. UTC

Ethereum’s dominance of decentralized finance (DeFi) is at risk as the scaling of the network, which is needed to maintain its dominance, may arrive too late, JPMorgan said in a report.

  • The final phase of the sharding, which is crucial for scaling the network, won’t arrive before next year, the bank’s strategists led by Nikolaos Panigirtzoglou wrote in the note published on Wednesday.
  • Full scaling is at least a year away and the risk is that during that time, the Ethereum network will continue to lose market share to competing networks, the bank warned.
  • Alternative blockchains such as Terra, Binance Smart Chain, Avalanche, Solana, Fantom, Tron and Polygon have been gaining the most market share in the DeFi market, and those competitors have received a lot of funding and have set up incentives to increase usage in their own systems, JPMorgan said.
  • The risk with Ethereum is that by the time sharding is implemented other ecosystems would have grown by so much that activity won’t return en masse to the Ethereum network, the bank noted.
  • Ethereum’s share of total value locked in DeFi has fallen from almost 100% at the start of 2021 to around 70% and will likely drop further before sharding is implemented in 2023, the report added.
  • Last month, Bank of America said that smart contract Avalanche is a credible alternative to Ethereum for DeFi projects, non-fungible tokens, gaming and other assets.


The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.