Ethereum's Staking Boom has made It Centralized:JPMorgan

Ethereum has seen rapid growth in "staking," a way people can earn rewards with their digital coins. However, financial experts at JPMorgan have noticed some issues.

After big updates in 2022, more people have been "staking" their Ethereum coins, hoping to gain profits. But JPMorgan’s specialists, guided by Nikolaos Panigirtzoglou, highlighted two main problems on Thursday: the network is becoming more centralized, and the profits from staking are going down.

"Lido" is one of the big names contributing to Ethereum's staking boom, and it brings along some worries about control. JPMorgan points out, "The top 5 providers, with Lido in the lead, control over half of Ethereum's staking". Even though platforms like Lido say they are decentralized, they actually hold a lot of control. This central power can be risky, as it might negatively influence the community’s interests and could be a weak point that hackers might target.

Another issue related to staking, especially through platforms like Lido, is “rehypothecation.” This tricky term means using staked coins in several places at once, and experts warn this could lead to a domino effect of problems if the coin’s value suddenly drops or if it’s targeted by malicious attacks.

Lastly, while Ethereum has grown in staking, the rewards are becoming less attractive. The total reward has dropped from 7.3% to about 5.5%, making it less rewarding than some traditional investment options. JPMorgan even mentioned last month that Ethereum hasn't been as active as expected after its recent upgrades, showing some decline in daily transactions and other metrics.