JPMorgan analysts believe that the switch to a proof of stake (PoS) security model has made the Ethereum network more centralized. They argue that the rise in Ethereum staking since the Merge and Shanghai upgrades has led to increased centralization and a decline in overall staking yield. The Merge replaced the way transactions were verified, reducing the energy consumption of Ethereum but also placing a significant amount of ether in the hands of centralized entities. Liquid staking platforms like Lido are seen as involving a high degree of centralization. JPMorgan warns of the risk of rehypothecation and a potential cascade of liquidations if staked assets drop in value or are hacked. The rise in staking has also decreased Ethereum’s appeal from a yield perspective. JPMorgan had previously noted a decline in Ethereum’s activity after the Shanghai upgrade. The article concludes by questioning how Ethereum will overcome the issue of validator centralization.

AI Sentiment: Negative