A recent article from The Block highlighted JPMorgan’s projections for the cryptocurrency market in 2024, focusing particularly on Ethereum. The bank’s analysts, led by Nikolaos Panigirtzoglou, predict that Ethereum will reclaim a larger market share within the crypto ecosystem and outperform its counterparts, including Bitcoin.
Ethereum’s EIP-4844, also known as Proto-danksharding, is a significant proposal in the development of the Ethereum blockchain, which is expected to go live in H1 2024. As outlined by Ethereum co-founder Vitalik Buterin, this proposal is a preliminary step towards the full implementation of Danksharding. However, it does not yet incorporate actual sharding.
The core feature of Proto-danksharding is the introduction of a new transaction type, termed a blob-carrying transaction. This type of transaction is similar to regular transactions but with an added component: a large piece of data called a blob. These blobs are notably large, approximately 125 kB, and offer a more cost-effective solution than similar amounts of calldata. However, the Ethereum Virtual Machine (EVM) cannot directly access blob data; it can only interact with a commitment to the blob.
A critical aspect of Proto-danksharding is that all validators and users are still required to validate the availability of the full data, including the blob contents. This requirement means that data bandwidth in a proto-danksharding environment is targeted at 1 MB per slot, which is less than the 16 MB envisioned in the full Danksharding specification. Despite this limitation, the introduction of blob-carrying transactions is expected to significantly enhance scalability, as the blob data does not compete with the gas usage of existing Ethereum transactions.
The Block’s report mentions that the upgrade’s benefits extend especially to Layer 2 networks like Arbitrum and Optimism and that by offering additional temporary data space, the upgrade aims to boost network throughput and lower transaction fees on these networks, enhancing their overall efficiency.
In contrast to their bullish outlook on Ethereum, JPMorgan analysts maintain a cautious stance on the broader crypto market for the upcoming year. They believe that the positive factors for Bitcoin, such as the potential approval of spot ETFs and the anticipated halving event in 2024, are already factored into its current price. The analysts draw on the post-2020 halving trend, where Bitcoin’s price-to-production cost ratio decreased, to support this view.
Regarding decentralized finance (DeFi), the analysts express concern about its slow progress in integrating with traditional financial systems. They claim that this integration is essential for transitioning from crypto-native applications to real-world utility. They observe that significant blockchain applications in traditional finance are currently confined to private blockchain platforms, with tokenization still in an experimental phase. They also believe that challenges such as platform fragmentation, slow cooperation, and lack of clear regulations are impeding its growth.
The JPMorgan research highlighted a slight improvement in venture capital funding for crypto in the last quarter of the year. However, JPMorgan analysts view this uptick as tentative and believe that a continued improvement into the first quarter of 2024 could signal the end of the prolonged crypto winter.
As CryptoGlobe reported on December 12, in a conversation with PYMNTS, JPMorgan’s Naveen Mallela and Gayathri Vasudev discussed advancements in the international payments sector. They emphasized the critical role of technologies like AI, blockchain, and APIs in improving cross-border payment flows. These technologies, according to Vasudev, have evolved from luxuries to necessities, particularly for high-volume, low-value transactions. She highlighted how AI and machine learning are being integrated into payment processing for tasks like sanctions screening and continuous monitoring.
Vasudev also pointed out the transformative impact of APIs in providing real-time foreign exchange rates and tracking payments, which could revolutionize the cross-border payment experience. Mallela discussed the importance of AI and machine learning in forecasting cash flow and liquidity, emphasizing the need for an event-driven infrastructure that dynamically responds to real-time events.
Discussing blockchain, Mallela highlighted its potential in cross-border payments, particularly in creating a shared ledger infrastructure to unify bank operations, enhance transparency, and improve FX settlement processes. He also mentioned blockchain’s role in facilitating liquidity marketplaces.
Looking ahead, Mallela envisions digital currencies like CBDCs, tokenized deposits, and stablecoins driving innovation in cross-border payments, emphasizing the need for digital identity solutions and KYC utilities. Vasudev predicts a shift towards embedded payments, where cross-border transactions become integral to business models, leading to seamless integration into various business operations.
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