JPMorgan Says Ethereum’s DeFi Dominance at Risk Due to ‘Sharding’ Delays

JPMorgan Says Ethereum’s DeFi Dominance at Risk Due to ‘Sharding’ Delays

Ethereum’s dominance of decentralized finance (DeFi) is at risk as the scaling of the network, which is needed to maintain its dominance, may arrive too late, JPMorgan said in an report.

The final phase of the sharding, which is crucial for scaling the network, will not arrive before next year, the bank’s strategists led by Nikolaos Panigirtzoglou wrote in the note published on Wednesday.

Full scaling is at least a year away and the risk is that during that time, the Ethereum network will continue to lose market share to competing networks, the bank warned.

Alternative blockchains such as Terra, Binance Smart chain, Avalanche, Solana, Fantom, Tron and Polygon have been gaining the most market share in the DeFi space, and these competitors have received a lot of funding and used incentives to increase usage in their own ecosystems, JPMorgan said.

The risk with Ethereum is that by the time sharding is implemented other ecosystems would have grown by so much that activity won’t return en masse to the Ethereum network, the bank noted.

Ethereum’s share of total value locked in DeFi has fallen from almost 100% at the start of the year to around 70% over the course of the year and will likely drop further before sharding is implemented in 2023, the report added.

Last month, Bank of America said that smart-contract Avalanche is a credible alternative to Ethereum for DeFi projects, NFTs, gaming and other assets.


Subscribe to get our top stories