Ethereum (ETH) developers have announced that the testing phase of a new network upgrade, called the Shanghai Fork, will begin in February. Expectations are that the improvements introduced by the update will be implemented between June and July of this year. One of the planned improvements is the ability to withdraw ETH from Staking.
Interestingly, in the past week, governance tokens for protocols offering net ETH staking skyrocketed. However, Rony Szuster, an analyst at MB Research, points out that the movement may not be related to the Shanghai Fork, but to the collapse of FTX. However, the analyst believes that the bullish moment for these crypto assets can be sustained until the middle of the year.
Fear of centralization
Governance tokens associated with network storage protocols have been greatly appreciated pointing to on Twitter through the Lookonchain profile. “With the arrival of the Shanghai Ethereum update, the price of seven net staking-derived tokens has grown by an average of 40.4% over the past seven days,” the post reads.
Staking is a tool where units of crypto assets are used in the process of validating transactions, in cooperation with network security. However, these units are locked into a contract, which loses liquidity.
In net staking, tokens are generated that act like “receipts”. Investors can use these tokens in decentralized protocols, ensuring that the storage asset’s liquidity is not lost.
Although the estimate happened around the same time that the developers revealed that they expected to start testing the Shanghai update, both events may not be related. Rony Szuster, of MB Research, estimates that the valuation of these tokens, as well as the influx of ETH deposits onto liquid storage platforms, will begin in November 2022.
“Lots of it [da valorização] Linked to the fall of FTX, Celsius and other centralized platforms. Much of the total staking of ETH was previously done through centralized agents. After the demise of FTX, many people were afraid to use these centralized functions, and began to migrate to platforms such as Lido and Rocket Pool.”
Zoster adds that the rise in Ethereum deposits has seen a boom in decentralized exchanges. A consequence of this growth, then, may be the appreciation of governance tokens. “The application is more used, has more fluidity, and governance code naturally follows the movement.”
Can you hold up to Shanghai Fork?
Despite the significant increase in governance tokens for decentralized staking protocols, the crypto market in general is on the rise. This scenario raises doubts about sustaining the upward movement by these crypto assets.
However, the MB Research analyst believes that there are chances for these tokens to continue well into the Shanghai Fork. “Until the update, it will not be possible to share ETH directly from Ethereum. So anyone looking for faster trades, or anyone looking to participate without risking centralized platforms, will continue to use protocols like Lido and Rocket Pool.”
However, the pace of deposits on decentralized ETH staking platforms will depend on crypto market conditions, notes Rony Szuster.
Will Net Staking End?
The main differentiating factor for platforms like Lido has been allowing investors to contribute to ETH and being able to use the values. With the advent of the Shanghai Fork, crypto assets can be dumped at any time, which partially reduces the effectiveness of Net Staking.
The state of Net Staking platforms after the upgrade can be seen in two ways, as assessed by MB Research analyst. “The liquid staking product will lose its meaning, because there will already be fully liquid ETH, both deposited and withdrawn from the network,” comments Ronnie Zoster. On the other hand, staking will still be valid.
“Whoever bets on ETH on their own needs to have structure, they need to make sure the node is working so they don’t get penalized. The staking product is still being offered through these protocols, so I don’t think it will go away. But a drop in deposits is likely.” “.