Crypto Conversation: Ethereum Revs Up

The second largest blockchain is getting an upgrade.
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What’s Hot in Crypto this week? 

Ethereum. It's the second largest blockchain platform in terms of market capitalization. Ethereum was the first to introduce a blockchain system that could also facilitate all sorts of “decentralized applications." It opened the door for all of the blockchain use cases that bitcoin, which is only intended for the transfer of its digital asset BTC, doesn’t allow for. 

ETH is Ethereum’s native currency, used as "gas" to pay for network transactions. It currently boasts a market cap of over 66 billion, with a 24 hour trade volume of $23 billion. 

Why is it hot now?

Ethereum is moving from a proof-of-work blockchain, where computing power determines rewards, to a proof-of-stake platform (dubbed Ethereum 2.0), where anyone who locks up their ETH can be chosen to validate blocks. 

This is not only more energy efficient and better for scaling up, but it should also allow the network to be more decentralized, and as such, more secure. 

The move will happen in stages, with a proof-of-stake main net living alongside the current Ethereum network for a while. The first step to launching this main net was to accumulate enough ETH (524,288 Ether, or $316 million) in this deposit contract which was launched on Nov. 4. 

Stakeholders who deposit exactly 32 ETH (worth around $19,000 at the time of writing) to the contract will become validators on Ethereum 2.0 and earn rewards on the network by processing transactions and creating new blocks. 

They will be able to withdraw their tokens only at the onset of phase 1.5, which is expected to launch somewhere between the end of 2021 and beginning of 2022. 

What’s Flipside Crypto’s take?

The uncertainty around the timeline has seemed to scare people off. At first, there was a lot of talk in the community that the contract would not reach its target sum by Dec. 1, thereby delaying the first phase of Ethereum 2.0. This would mean having your 32 ETH locked up for an indefinite period of time — which not many people want to risk. 

The graph below clearly reflects that uncertainty at the beginning of November. But as the total locked up started to ramp up, so did the momentum and number of stakeholders willing to join.   

eth_deposits

At total of 10,000 new validators joined the network after the launch of Ethereum 2.0 was confirmed for Dec. 1 .

Prior to Nov. 20, around 3,425 investors had deposited 32 ETH into the contract. On Nov. 24, that number tripled to 9,660 users. There are now around 26,826 users who have locked up their money for the next two years at least. 

The considerable influx of new validators coming in on Nov. 24 happened right after the deposit contract reached its minimum amount for launching main net. 

That Ethereum also saw its price rise nearly 10% over a 24-hour period on Nov. 23, surpassing $600 for the first time in two years, must have inspired confidence in the project and a desire to be in on it. 

Indeed, users who are able to lock up the $20,000 are expected to make a nice return on their investment, with roughly 20% in annualized rewards. 

The Flipside Crypto Asset Score Tracker provides institutional and sophisticated retail investors the ability to track over 500 cryptocurrencies' fundamentals. FCAS Tracker is currently free to a select group of new users as it continues to develop the product. Visit Flipside here to gain access to Flipside Analytics.