The major characteristic of a network like Ethereum is decentralization. However, when it starts moving away from the part of decentralization, there’s a problem. So, this is what JPMorgan is trying to point out in their new report.
JPMorgan Raises Alarm About Ethereum
- JPMorgan is now raising alarms about certain issues on the Ethereum network. So, according to this company, there are concerns due to an increase in the number of liquidity providers on the Ethereum network. Due to the number of Ethereum liquidity providers, it can cause a problem called oligopoly. So, before we proceed, let’s talk about the meaning of oligopoly.
- An oligopoly is a kind of market structure with a small number of firms, none of which can keep the others from having significant influence. So, this is basically a kind of market where few firms have total domination of the market. This is what JPMorgan is talking about the Ethereum network. So, with the increasing number of liquidity providers, it can lead to a scenario where only a few firms control the market.
Ethereum Moving Away from Decentralized
- One of the areas of concern for JPMorgan is the risk of centralization within the Ethereum network. So, due to increased congestion of the nodes, there are more chances of economic risks. Moreover, the most recent upgrades on this network show Ethereum is now moving toward the path of centralization.
- With the rate at which the network is going, there are chances of few people controlling the network. So, this small number of powerful forms can either act as targets for the risks, or they may limit the outside competition and rule it. With close to $200 billion in market cap, Ethereum is an important part of the crypto market. Hence, there’s a need for prevention of risks such as this to avoid catastrophe.
JPMorgan Points How Ethereum Upgrades are Ruining the Network
- After the merge, there was a roadmap of other upgrades for the Ethereum network. So, one of the concerns of JPMorgan is that these upgrades are ruining a lot of things on the network. Previously, we made a report on how liquid staking on the Ethereum network is increasing to new levels. So, if this should continue, it can lead to bad tidings from the Ethereum project.
- Lido, Figment, Coinbase, Binance, and Kraken are the five firms within the Ethereum network that wield the most power. So, according to data from JPMorgan, 50 percent of ether staking on the Ethereum network is by these firms. According to JPMorgan, in their report, they said, “decentralized liquid staking platform involves a high degree of centralization.”
Conclusion
There was a recent report from JPMorgan regarding the state of the Ethereum network. So, they are raising alarm due to the high rate of centralization on the Ethereum network. Apparently, firms such as Lido, Figment, Coinbase, Binance, and Kraken are taking over a large chunk of the staking activities in this network. This poses a serious risk for Ethereum.
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