JPMorgan Says Ethereum’s Shanghai Upgrade to Raise Staking Toward Proof-of-Stake Blockchain Average

Ethereum’s staking ratio is around 14% compared with an average of 60% for the other major PoS blockchains.

AccessTimeIconFeb 9, 2023 at 10:59 a.m. UTC
Updated Mar 8, 2024 at 4:46 p.m. UTC
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Ethereum’s Shanghai upgrade, scheduled for mid-March, will raise the blockchain’s staking ratio in the medium term, JPMorgan (JPM) said in a research report Wednesday.

There is plenty of room for the 14% ratio to rise, the bank said, given that the average for other proof-of-stake (PoS) networks is about four times as high. The ratio measures the amount of staked ether versus the circulating supply.

“Assuming the staking ratio converges over time to the 60% average of other major PoS networks, the validator number could increase from 0.5 million to 2.2 million and the yield would fall from 7.4% current to around 5%,” analysts led by Nikolaos Panigirtzoglou wrote. In a proof-of-stake system, validators attest that a block is accurate and can be added to the blockchain.

A large portion of the future increase in staking will likely move to liquid staking protocols such as Lido, the bank said. These protocols “enable liquidity for staked assets, which would otherwise be locked in the staking contracts, by providing an equal amount of derivative token in exchange for staked ether which can be traded.”

JPMorgan notes that liquid staking protocol derivative tokens have normally traded at prices below their underlying asset, but as the Shanghai upgrade nears they are converging to parity with ether (ETH).

It could be argued that the utility of these liquid staking protocols would be reduced as the upgrade date approaches, the note said. The counterargument is that the utility of these protocols is not limited to only providing liquidity, but also acting as an intermediary for retail investors who would otherwise face a barrier of 32 ETH ($52,000) for staking, the note said.

As a result, liquid staking protocols have become major decentralized finance (DeFi) players, prompting concerns about network centralization, the note added.

UPDATE (Feb. 10, 10:42 UTC): Adds definition of staking ratio in second paragraph.


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Will Canny is CoinDesk's finance reporter.

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