As it is known, the highly anticipated Merge update in Ethereum took place in September 2022.
With this update, ETH switched to the PoS system.
According to The Block, more than a year has passed since the ETH Merge update, and a report was prepared by JP Morgan analysts.
The report prepared by JPMorgan analysts led by Nikolaos Panigirtzoglou said that staking in ETH increased after Merge, which made ETH more centralized.
“There has been an increase in Ethereum staking since the Merge and Shanghai upgrades. This increase in staking is making the Ethereum network more centralized.
As ETH became more centralized, there was a decrease in staking yield. “The total staking return has decreased from 7.3% before the Shanghai upgrade to approximately 5.5% currently.”
“Lido Controls Most of the Staking Activity!”
Referring to the Shanghai upgrade, which allows the unlocking of staked ETHs, analysts said that ETH staking transactions increased after the Shanghai upgrade.
Emphasizing that Lido controls the majority of Ethereum staking activity at this point, analysts said, “Many in the crypto community saw Lido, a decentralized liquid staking platform, as a better alternative compared to centralized liquid staking platforms associated with centralized exchanges.”
“The top 5 liquid staking providers control over 50% of staking on the Ethereum network, with Lido in particular accounting for almost a third.
Although platforms such as Lido are decentralized liquid staking platforms, they involve a high degree of centralization risks.
At this point, it goes without saying that centralization from any protocol also poses risks for the Ethereum network.”
Analysts pointed out that, in addition to centralization, some applications used in staking activities also pose risks, and cited the use of liquidity tokens as collateral in more than one DeFi protocol at the same time, as an example.
*This is not investment advice.