3 Factors Can Trigger Rally Before Ethereum 2.0
The Ethereum developer community is approaching the launch of Ethereum 2.0, a major milestone for the blockchain network.Ethereum 2.0 will mark the beginning of the transition from proof of work to proof of stake.In a PoS system, miners do not need to verify blocks mining and operations. Instead, users or stakeholders verify the data on the blockchain.
According to Testnet coordinator Afri Schoedon, there is currently no specific date for Ethereum 2.0 to be released. “The last specification has not been applied to any customers and we haven’t started a coordinated test network yet,” he says.
Ethereum co-creator Vitalik Buterin also announced that Ethereum 2.0 is on track, but this will be the case if client developers expect it to be done by the third quarter of 2020. However, the three key metrics show that investors and users are highly anticipating the integration of Ethereum 2.0 at the end of the year. Metrics are the growth of Ethereum addresses, increased market demand for Ether (ETH) and increased user efficiency in the chain.
What is Ethereum 2.0?
When Ethereum’s customer developers launch Ethereum 2.0, they will release a new Ethereum network that will work mainly with the existing network. Ethereum 2.0 will use sharding as the basic scaling solution. District0x describes sharding as the most sophisticated Ethereum scaling technology because it divides the blockchain network into many shards or “shards” and allows each department to process data on its own. Sharding speeds up data processing in the Ethereum blockchain network because node operators can verify data in their sharding, not the entire blockchain.
Ethereum 2.0 takes longer than the implementation of most blockchain network upgrades. However, its complexity is unprecedented and therefore longer test times are very important. Responding to the criticism that the Ethereum developer community “changed” its narrative and delayed the release of Ethereum 2.0, Buterin said:
“People often complain that the Ethereum narrative is“ constantly changing ”. This is wrong. On the contrary, the Ethereum narrative has a pluralistic nature by nature, involving situations where at least one of many applications will grow and develop. ”
Fast address growth
Glassnode’s blockchain data shows that 40 million addresses currently have Ethereum. In the first quarter of 2018, when the price of ETH reached an all-time high of $ 1,400, the number of Ethereum addresses was below 10 million. Although the price of ETH has decreased by 85% since then, the number of addresses has actually increased by 350%.
John Lilic, a business technology developer from ConsenSys, said: “There are only 35 countries in the world with more than 40 million inhabitants. It now has 40 million ETH addresses. ETH is now a more widely used coin than 80% of the countries in the world. ”
The increase in Ethereum addresses shows that the market is more evenly distributed among retail and institutional investors and reduces the impact of whales on the market. It also shows that more and more investors are usually trying to get ETH before Ethereum 2.0 is released, in order to qualify for stake and rewards requiring 32 ETH over time. The growth of addresses seems to be another reason for the rapid increase that Ethereum 2.0 will be on the market earlier this year.
Rising market activity
When Ethereum 2.0 is launched, users can transfer 32 ETH to a contract and become a stake agent. 32 ETH staking will result in approximately 4.6% to 10.3% awards, according to Collin Myers, head of blockchain firm ConsenSys’ global product strategy. However, each stakeholder cannot receive more than 32 ETH shares as a hard limit is imposed. BitMEX Research said in its report on Ethereum 2.0:
“If more than 32 ETH are sent to the contract, the stake does not benefit from these additional coins and if less than 32 ETH is sent, the stake will not be activated. Therefore, in order to transfer ETH to Eth2, the person must be made in groups of 32 tokens. Each 32 ETH party can be a separate accumulation substance. ”
The awards that bookmakers could win through 32 ETH, which were worth around $ 6,500 at the time of writing, caused the demand for ETH to increase significantly in recent months. A system of interest to Ethereum over time attracts many retail investors and institutions. Over the past year, Grayscale Investments saw Ethereum Trust assets under management, or AUM rose from $ 11.7 million to $ 276.5 million.
Institutions and accredited investors recommend increasing corporate demand for ETH, primarily because Grayscale Investments uses the Ethereum Trust to invest in a tightly regulated ecosystem.
Long-term Bitcoin (BTC) investors, such as billionaire co-founders of Gemini exchange, Tyler and Cameron Winklevoss, are among many high-profile investors who have expressed optimism towards Ethereum in the late period. Speaking to a former Bloomberg journalist and founder of The Defiant, Camila Russo, the Winklevoss twins said: “We are big fans of Ethereum. We have a material amount. “
In the medium and long term, the Ethereum futures market for professional traders and institutions will also see a structural change. Upon the release of Ethereum futures contracts physically built on the ErisX platform, traders are allowed to retain their purchased ETH and not to leave it entirely in the hands of a third party. Giving ErisX CEO Thomas Chippas, says:
“We believe that Ethereum futures will bring more market participation, diverse trading goals and time horizons, more robust and flexible markets and more advanced risk management tools.”
Physically settled contracts typically affect the price of an asset more than other types of derivatives because they have an impact on the actual supply of the asset.
Increased user activity
According to Etherscan.io data, the total gas use in Ethereum has reached a record level. It shows that the level of user activity on the Ethereum blockchain network has increased with the expectation of Ethereum 2.0.
Gas is a token used to power the Ethereum network. Users must pay a gas fee to transfer smart contract data or payments. For example, decentralized applications running on Ethereum and using smart contracts require gas for the blockchain network to process information.
Total daily gas consumption reached 61 billion on May 23, twice as of January 2019. Ethereum’s price has increased nearly twice since then, which tends to be a healthy recovery trend for ETH. As long as many users use the Ethereum network and pay gas to process the information, Gnosis product developer Eric Conner said the update from PoW to PoS would be smooth.