Ethereum’s Shanghai Upgrade Set to Boost ETH Staking and Skyrocket PoS Validators, Reveals Report

JP Morgan Predicts Increase in Ethereum Validators and Liquid Staking Market Share

JP Morgan Predicts Rise in Ethereum Staking Ratio and Validator Count Following Shanghai Upgrade

JP Morgan analysts expect Ethereum’s staking ratio to move towards the 60% average on other Proof-of-Stake blockchains. In a report released on Wednesday, the bank predicted that the number of validators on Ethereum should increase to over 2 million as the ratio of staked ETH increases.

The report also highlighted that yield returns could dip while the number of validators on Ethereum should increase. According to the bank, yield returns could dip to 5% from 7.4% as validators and staked ETH ratio nears the PoS blockchain average. Yield refers to rewards that users, or in this case validators, receive for participating on the network and staking Ether.

JP Morgan also sees liquid staking protocols like Lido Finance claiming more ETH staking market share. Unlike the standard staking model where tokens are locked and users cannot access liquidity on those coins, Lido and other liquid stakers provide derivative assets pinned to the staked tokens. This allows holders to trade these derivatives and leverage liquidity facilities underpinned by their staked assets.

The Ethereum developer team has announced that the Shanghai update should roll out in March, barring any delays. The update is expected to spur a rise in Ether staking ratio, the number of validators on the network, and activity on liquid staking services like Lido Finance. Ethereum’s switch to Proof-of-Stake from Proof-of-Work consensus in September 2022 effectively replaced miners with validators who play a similar role.

JP Morgan’s research also predicted a drop in yield returns on staked ETH. However, the bank expects a significant increase in the number of validators on Ethereum. The number of validators on ETH’s PoS chain recently crossed half a million following a surge in client participation since the Merge.

Coinbase CEO Brian Armstrong tweeted recently that retail crypto staking in America could suffer turbulence. He hinted that the SEC plans to eliminate retail crypto staking, which could spell difficult times ahead for US-based ETH stakers. Currently, the number of staked ETH has crossed 16 million Ether.

Staking is a significant innovation in crypto that allows users to participate directly in running open crypto networks. It brings many positive improvements to the space, including scalability, increased security, and reduced carbon footprints. However, if the SEC eliminates retail crypto staking, US-based ETH stakers could face difficult times ahead.

Martin Reid

Martin Reid

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