In a recent analysis, JP Morgan’s Global Market Strategy team highlighted key developments within the Ethereum network that could have a significant impact on its classification under securities laws. that much report This comes at a critical time for ETH, as the Swiss-based foundation is under investigation by the U.S. Securities and Exchange Commission (SEC).
Why Ethereum is not a security
JP Morgan highlights the continued decline of Lido’s ETH stake. This has fallen from about a third a year ago to about a quarter now. This shift to a more decentralized staking ecosystem could alleviate regulatory concerns about centralization within the Ethereum network.
“What is positive for the Ethereum network is that Lido’s share of staked ETH has decreased further, from about a third a year ago to about a quarter now. “This will reduce concerns about concentration on the Ethereum network and increase the likelihood that Ethereum will not be designated a security in the future,” the report states.
Analysts also point to the so-called “Hinman Papers,” released last June, which played a pivotal role in shaping the SEC’s stance on digital tokens. According to the document, the degree of network decentralization is important because tokens in sufficiently decentralized networks may not be classified as securities.
The contents are as follows:
Notably, SEC officials have acknowledged in the past that tokens in sufficiently decentralized networks are no longer securities because the Howey test lacks a “control group.”
Community perspective on decentralization
The Ethereum community has reacted positively to these developments. Anthony Sassano, founder of The Daily Gwei and co-founder of EthHub. I left a comment. Lido’s decline in dominance can be attributed to increased competition in the staking space. According to Sassano, this is a step towards a more decentralized and healthy ETH staking ecosystem.
“I have been saying for a long time that the best way to stop Lido from growing and losing market share is to increase competition in the staking space where we are now! The Ethereum staking ecosystem has never been healthier,” Sassano said.
However, opinions on the current reclamation project remain mixed, with some users questioning whether the reclamation project is “better.” In response, Sassano argued that “there can only be debate if there is a vibrant free market of Ethereum staking projects, rather than a few holding the majority of the market share.”
Seraphim, head of growth at Ethena Labs, said: offer Offering a pragmatic view of the situation, suggesting that delivering better yields is a more effective strategy than criticism, he said: “Despite my Lido bias, it turns out that delivering more yields is a better business strategy than whining like a Happy for Rocketpool troll about the LRT project. It accelerates the space into something new and exciting.”
More Positive Things About Ethereum
JP Morgan also highlighted in its report the importance of the Dencun upgrade, which is a major technological advancement since the previous Shanghai upgrade. According to the report, the Dencun upgrade “significantly reduced transaction costs on Ethereum Layer 2” by introducing blobs and crypto schemes such as the KZG promise scheme.
The expected Petra upgrade is expected to introduce Verkle trees to promote efficient data storage and further enhance Ethereum’s scalability and efficiency. The report optimistically notes that “Petra… will save storage space and bandwidth by introducing features such as Verkle trees for efficient data storage, which aims to simplify block verification by pruning historical blocks that are more than a year old.” .
At press time, ETH was trading at $3,275.
Featured image from Gagadget.com, chart from TradingView.com