Ethereum 2.0 Likely to Affect DeFi and DApps With PoS Introduction
While Ethereum has brought about a whole new realm of possibilities due to its native token Ether (ETH) and its smart contract and tokenization capabilities, it is often faced with challenges such as network congestion, relatively low transaction times and throughput, large blockchain size and excessive electricity use for mining — all issues Bitcoin also shares.
While Bitcoin (BTC) was created by an anonymous developer that left the network to be developed by its capable community, Ethereum was always envisioned with a roadmap and a team behind it. While the plan has been subject to changes and delays, Ethereum has always meant to implement certain measures to combat all of the aforementioned issues, much like the developer community has done with Bitcoin and updates such as Segregated Witness.
Ethereum was created in several stages, many of which have been implemented, but Serenity — or Ethereum 2.0 — is particularly important for the network and community because it will bring about some of the biggest changes in the network, including proof-of-stake and sharding updates. With the Ethereum network use falling so heavily on the decentralized finance and distributed application ecosystem, many wonder what will happen to the DeFi ecosystem as the Ethereum 2.0 update is rolled out.
Ethereum 2.0 is set to launch in the second half of 2020, following its announcement in 2018 and launch delays in 2019 and 2020. The first stage is currently known as “Phase 0” and will see the launch of the Beacon Chain, the blockchain on which the first iteration of Ethereum’s PoS consensus model will be implemented. The second stage, “Phase 1,” will bring the implementation of shard chains that are compatible with each other and can be used simultaneously.
Related: Ethereum 2.0 Staking, Explained
While these two stages will build the foundation of Ethereum 2.0 and the solutions for the congestion and scalability issues Ethereum is currently facing, these two stages will coexist with the current blockchain, and the two will only be merged in the third stage, “Phase 1.5.” Ethereum will coexist alongside 63 other blockchains, with the aforementioned Beacon Chain eliminating the need for token swaps for those that wish to remain on the original chain throughout the implementation of Ethereum 2.0.
Once Ethereum 1.0 is “merged” with Ethereum 2.0, the blockchain history will remain, with Ethereum 2.0 being considered “complete” when Phase 2 and beyond are released, which is expected to happen by 2021. Until then, the proof-of-work consensus model will continue to be supported and developed to ensure a stable basis for DApps and DeFi before the jump from a single-chain PoW protocol to a multichain PoS system is made.
Ether is the second-largest cryptocurrency, but it is currently only capable of processing 15 transactions per second. Moreover, gas use and limits create a fee market where people must often compete for transactions and smart contracts to be processed quickly by paying higher gas prices. NEO, for example, is theoretically capable of processing 10,000 transactions per second, which means Ethereum has some catching up to do.
While increasing the gas use limit is possible and was enabled in September 2019, it comes with a heavy toll, as it further extends an already big blockchain. Ethereum’s blockchain is currently 142 gigabytes, and while Bitcoin’s chain is bigger, just 283 GB have been mounted on after more than 10 years of blockchain history. This makes the Ethereum chain, which is less than five years old, almost as resource-intensive as Bitcoin, and the issues are only bound to get worse as the DeFi ecosystem expands.
So, it seems that Ethereum is in desperate need of new solutions. While some are being developed alongside Ethereum 2.0, such as Plasma and Raiden — the official Ethereum 2.0 and other layer-two solutions — Jon Jordan, the communications director at DappRadar, told Cointelegraph that these come with a certain degree of risk:
“Of course, issues such as gas prices can be solved without Eth 2.0 There are plenty of layer 2 solutions launching and available – Matic, Skale Labs, OMG Network etc – which would solve these problems to some degree. And dapp developers are actively integrating these technologies or attempting to build their own. However, all these add potential risk. Eth 2.0’s advantage is it’s core to the underlying blockchain but for that reason it’s a more complex task.”
When Phase 0 is launched, users that want to stake Ether will have to send their coins to a one-way smart contract. This means that the Ether that leaves the current network during Phase 0 will only be usable on the old blockchain once the Phase 1.5 “merger” happens — at which time the PoS and chain sharding features will already be a reality for all of Ethereum.
Jack O’Holleran, the CEO of the Skale Labs — the company that developed the Skale Network blockchain platform based on Ethereum — previously explained that the shift to Ethereum 2.0 will take time for DeFi and DApps, as most will probably wait until the merger and then take time to transition “at their leisure.”
This transaction period between the current version of Ethereum and Ethereum 2.0 doesn’t seem to be a major concern in the DeFi space. Jordan stated that this period will probably not impact DApps directly but that “any uncertainty or technical issues arising could slow activity” — so, it’s still worth considering.
Upon full completion, the PoS system will likely affect DApps, particularly in the DeFi space, with the change bound to bring improvements to the whole ecosystem, allowing ETH transactions and DApps to compete with other blockchains. According to Jordan, the sharding chains and PoS consensus model will solve some of the most fundamental issues of DApps.
The sharding feature on Ethereum 2.0 will allow 64 chains to run in parallel, meaning that the transaction speed and throughput will be considerably increased. These chains will be interoperable, and users will be able to spend Ether across multiple chains. However, the burden of keeping the blockchain history will be distributed throughout the multiple chains, allowing the network to be more accessible while still secure and supporting legacy DeFi functionalities, as Isa Kivlighan, a digital marketing manager at Aave — an Ethereum-based DeFi app — said in a conversation with Cointelegraph:
“ETH 2.0 will change the dynamics of DeFi in one way as we might see less congestion with transactions in DeFi and potentially the staking model might reduce the costs of transactions. Main thing about sharding is that it should not break the DeFi composability according to Vitalik Buterin. It might on the other hand affect the way of doing Flash Loans […] if the target where the flash borrow is taken is in another shard as Flash Loans rely on the atomicity of Ethereum, which means that Flash Loan happens in one Ethereum transaction.”
All of these improvements have a huge impact on DApps, especially in the long run. As the Ethereum ecosystem develops, more DApps and more people using them means that more resources will be needed. Sharding solves this issue to a degree, and as other solutions are implemented, the community can continue to invest time and resources into the DeFi and DApp space without fear of “technical debt.”
It is still worth noting, however, that while Ethereum 2.0 seems promising for the DeFi space, it is not without its risks, which is why developers are still working on the development of Ethereum 1.0 even as Ethereum 2.0 is being rolled out, as Jordan stated:
“In this context, the advantages offered by Eth 2.0 greatly outweigh the risks. Unlike Bitcoin, which is never going to change much, if Ethereum wants to fulfil its vision — as well as competing with new rivals like Cardano, Flow, Near etc etc — it needs to fundamentally change. But this isn’t to say there aren’t any serious risks. It’s highly unlikely but, handled badly, Eth 2.0 could destroy confidence in the entire project!”
Although sharding and PoS bring obvious benefits to the network, the latter will change the way Ether is produced. Staking will allow anyone with 32 or more ETH to earn new coins by staking theirs, which adds a penalty system for any malicious attempts on the network while rewarding those that process transactions accordingly.
Related: Ethereum 2.0: The Choice Between One’s Own Node and a Staking Service
While there are arguments for and against the PoS model, it’s worth noting that this system resembles lending — the most popular application for DeFi apps — in its most fundamental manner, as users will lock their ETH in order to receive interest. With this in mind, a pertinent question arises: Can these two aspects coexist in Ethereum? Won’t the most profitable take the least profitable activity’s place? According to Jordan, this isn’t likely to happen:
“Staking and lending aren’t mutually exclusive actions. In the short term, I’d expect some value that would otherwise have gone into lending and DeFi dapps to go into staking but most of the value going to staking will come from large scale crypto operators to secure Eth 2.0. These value flows would never have gone into DeFi. I guess what will be exciting to see if/how dapp developers look to combine Eth 2.0 staking mechanics within DeFi dapps for the smaller retail users.”
While Ethereum is currently in need of urgent solutions for its congestion issues among others, it’s also worth noting that Ether is still the largest altcoin out there. This begs the question of how well it can do once Ethereum 2.0 is implemented and its capabilities improve substantially. Some also believe that staking itself can trigger an ETH price rally.
Whatever the price may be in the future, Ethereum 2.0 is very important for the DeFi ecosystem, but it needs to be done right to ensure it does not interfere with one of its major ecosystems: the DeFi space. As Kivlighan put it: “It’s better to build a valid system that works well in practice than launch something that requires changes after deployment.”
105 Million Ethereum Out of Total Circulating Suppy is ‘Staking-Ready’
If the recent commotion has anything to go by, the Ethereum 2.0 phase zero mainnet launch should be around the corner in the next few weeks. As the community was geared towards its imminent launch, statistics on the ETH 2.0 switch to Proof-of-Stake continue to build momentum.
As discussed in previous reports, Ethereum 2.0 validators have a simple standard for validating transactions that is to have 32 ETHs in their addresses. The validator will be responsible for the functionality of its own node and is expected to incur profits of approximately 5-10 percent per transaction. fNow, according to Arcanes’ recent weekly update, it has been suggested that almost 95 percent of the total supply of ETH is ready at the moment for staking. The analogy was drawn as in the past few weeks, nearly 120,000 ETH wallets were ready for staking, as they held more than 32 ETHs.
Weeks before, it was indicated that these particular sets of wallet addresses also accounted for 95 percent of all the Ethereum. Close to 105 million of the ETH circulation supply out of the total 111 ETH tokens were held by these wallets. The report furthered stated,
“The most common wallet sizes above 32 ETH are round numbers like 50, 100, and 40, just ahead of the numbers between 33-40. This could signal strategic wallet sizing above the staking threshold.”
However, out of the total Ether in the circulating supply, about 18 million were still held by exchange addresses. Now, this may directly affect the overall staking statistic as certain small traders are just accounted as a part of balances on exchanges.
It is also important to note that, Binance, which is one of the largest exchanges in the world had conveyed its support for staking and the exchange announced that users will be able to actively participate via Binance.
Author: Published 3 hours ago
Ethereum (ETH) Price Prediction – The Latest Price Information
Here is our latest analysis for Ethereum (ETH) price prediction. Here is the latest information forecasting Ethereum’s next anticipated price move.
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Ethereum Signaling Bullish Breakout: A Strong Case For Upside Above 100 SMA
Ethereum is recovering from the $225 support against the US Dollar. ETH price is now trading near the $230 level ad it seems like there are chances of more gains if it breaks the 100 SMA (H4).
- ETH price is slowly gathering pace from the key $225 support area against the US Dollar.
- It is now approaching the key $235 resistance and the 100 simple moving average (4-hours).
- There was a break above a major declining channel or a bullish flag with resistance near $228 on the 4-hours chart of ETH/USD (data feed via Kraken).
- The pair could start a strong increase if it closes above $232 and the 100 simple moving average (H4).
This past week, Ethereum grinded lower after it failed to clear the $235 resistance against the US Dollar. ETH price broke the $230 support level and settled well below the 100 simple moving average (4-hours).
However, the $225 support zone acted as a strong buy zone. A low is formed near $224 and the price started a steady increase. There was a break above the $228 resistance, plus the 23.6% Fib retracement level of the downward move from the $237 high to $2 2 4 low.
There was also a break above a major declining channel or a bullish flag with resistance near $228 on the 4-hours chart of ETH/USD. It has opened the doors for more gains above the $230 level.
Ethereum price trades below $230. Source: TradingView.com
Ether price is currently showing a lot of positive signs and it might continue to rise towards the $232 resistance and the 100 simple moving average (4-hours). The 50% Fib retracement level of the downward move from the $237 high to $224 low might also act as a resistance.
The main resistance is still near the $235 level. A successful close above the $235 resistance could lead the price further higher. The next major resistance is seen near the $240 level, above which it could test $250.
On the downside, there are many important supports forming near the $228 and $225 levels. If Ethereum fails to clear the 100 SMA, there are chances of a fresh drop below $228.
A downside break below the $225 support zone could accelerate decline in ether. Any further losses might open the doors for a push towards $218 or even $205.
4 hours MACD – The MACD for ETH/USD is slowly gaining in the bullish zone.
4 hours RSI – The RSI for ETH/USD is currently just above the 50 level.
Major Support Level – $225
Major Resistance Level – $235
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Author: Published 3 hours ago
As Bitcoin Struggles, This New Crypto Has Soared 250% To A Massive $2 Billion Valuation
Bitcoin and cryptocurrency investors, feeling bullish amid a broad post-coronavirus crash rally, are seeing massive gains from some smaller cryptocurrencies.
The bitcoin price, under pressure since its latest attempt to breach the $10,000 per bitcoin level last week failed, is stuck on a downward trend—but other digital assets are soaring.
Following its launch just this week, decentralized finance protocol Compound’s comp token has surged around 250%, giving it a market value of around $2 billion, according to some calculations.
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The bitcoin price has added some 30% so far this year but bitcoin’s recent rally has stalled-even as … [+] some smaller cryptocurrencies are making massive gains.
Users of the Compound lending platform began earning comp tokens this week, with the cryptocurrency getting a boost from major U.S. bitcoin and cryptocurrency exchange Coinbase announcing it will begin listing the token.
“Once sufficient supply of comp is established on the platform, trading on our comp-U.S. dollar and comp-bitcoin order books will start in phases, beginning with post-only mode and proceeding to full trading should our metrics for a healthy market be met,” Coinbase said in a blog post.
Comp has this week become the 25th most valuable cryptocurrency, according to CoinMarketCap data, with its price surging to over $200 per token, up from around $60 at the beginning of the week.
Some early calculations, which are inconsistent due to comp’s immaturity, have put the total value of comp’s combined tokens in circulation at a little over $2 billion.
Others, that count fewer comp tokens in circulating supply, put the cryptocurrency’s value at around $500 million—in comparison bitcoin’s market capitalization is just over $170 billion.
Comp, a so-called governance token that allows holders to influence the Compound protocol, are awarded every day to users of the decentralized finance platform.
Comp is currently only listed on a handful of smaller cryptocurrency exchanges, prompting some bitcoin and crypto market watchers to warn the sudden price surge could be short-lived.
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As the bitcoin price treads water, the comp price has soared almost 250% since it began trading … [+] earlier this week.
Decentralized finance, often known as DeFi, has emerged as a popular growth area for bitcoin’s blockchain technology, sparking a frenzy of speculation that echos the 2017 cryptocurrency and initial coin offering bubble.
DeFi platforms, blockchain-enabled systems that are often based on the ethereum network, allow for the lending and trading of cryptocurrencies and other digital assets without the need for centralized intermediaries like banks and exchanges.
“DeFi is hitting its stride and the space will continue to accelerate,” research firm Delphi Digital wrote in a report out this week.
Author: Billy Bambrough