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Investigation: Ethereum 2.0 will be “extremely complicated”, which makes delays “likely”

The hype surrounding the upgrade from Ethereum 2.0 has increased dramatically in recent weeks. With the introduction of the “Topaz” test network for the Ethereum software, which has been successful so far and is widely accepted and used by the ETH community, it has become likely for some that the blockchain upgrade will be introduced in the coming months.

This is mostly speculation: It was difficult to find precise data for the upgrade. However, the co-founder of the Ethereum Foundation, Vitalik Buterin, hinted in February that developers will spend the “next few months” refining the upgrade to launch sometime this year. Similarly, researcher Justin Drake once proposed a July launch that could match Buterin's vague guess of a schedule.

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– Terence Tsao (@terencechain) May 1, 2020

Although ETH holders have been waiting for 2.0 for years, this time frame is too optimistic, according to a report by BitMEX Research on May 4. The reason:

The transition from Ethereum 1.0 to 2.0 has “turned out to be more complicated than expected.”

What is Ethereum 2.0?

The “Cliff's Notes” version states that Ethereum 2.0 is a new version of Ethereum that will implement and work with technologies such as Proof of Stake, Sharding and more to improve the speed, transaction throughput and decentralization of the Network. At the Ethereum Asia Supermeetup from Token 2049 in March 2019 Buterin explained the upgrade as follows:

It is a way to bring together technical improvements, such as PoS and sharding, to add the virtual machine, Merkle Trees, the efficiency of the protocol and a whole host of small technical things that you have never heard of.

In order to make this change from the current iteration to 2.0, the new network will actually work side by side with the old one, which means that technically “two” Ethereum Mainnet chains will run at the same time.

This forced branching is due to the fact that Ethereum 2.0 is still in the first phase (“Phase Zero”), which basically tests how staking works in a real situation compared to traditional crypto mining .

In addition, due to the structure of the new network, smart contracts and cryptocurrencies based on Ethereum need to be adjusted to work properly with the new chain.

Ethereum could experience a boom

When Ethereum 2.0 arrives, analysts expect the market for ETH to change irrevocably for the better. David Hoffman said in a recent newsletter that with the introduction of staking, the amount of ETH that can be bought on the open market will decrease sharply.

Hoffman suspects that more than 10 to 30 Percentage of the cryptocurrency could be taken out of the circulating supply due to the demand for staking. This favors a price increase.

Ether’s price is going to appreciate.

This is a forward looking statement about the value of an asset. Why am I able to say this with confidence?

Because Ether has its own native scarcity mechanisms

– ETH in DeFi

– ETH staked

– ETH burnt

Meanwhile, money printer go brrr https://t.co/dMxkASYzAp

– DavidHoffman.eth (@TrustlessState) April 13, 2020

Angel investor and professor Adam Cochran went one step further. In a detailed Twitter thread, he said that in addition to a negative supply shock due to staking demand, ETH 2.0 will also cause other economic effects that will catalyze growth:

  1. ETH's offer could actually start to decrease: Although not yet implemented, there is an upgrade proposal stating that ETH should be burned when transactions take place. This would only exacerbate the supply-demand dynamic in favor of bulls. This is a popular suggestion that has found some developer support.
  2. The basic demand for ETH will increase: Since Ethereum 2.0 makes the blockchain much faster and more adaptable, Cochran expects the demand for ETH to increase: “ With the release of ETH 2.0 we will see that ETH will drastically increase its tx / s and thus its commercial and consumable viability. Gas blockages, high transaction costs, long waiting times in the dApps disappear, even in a busy market. ”

His analysis led him to conclude that Ethereum 2.0 is likely to cause “the greatest economic shift in society” .

It is already happening, investors are collecting Ethereum

Cochran's thesis already seems to have been proven correct. Although the accumulation is likely for various reasons, data from the Glassnode research platform in April indicate that the number of Ethereum wallets that are more than 32 Coins included to 14 percent has increased.

– To participate in staking, you will have to at least 32 Own Ethereum –

“How many potential ETH 2.0 validators are there? There are currently 116. 351 Ethereum addresses with 32 or more ETH coins – an increase of almost 14% within the past year. ”

Text proof: Cryptoslate

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