Ethereum 2.0 ignites new enthusiasm for the bull market
When it comes to the difference between Ethereum and Bitcoin, the "Internet Currency War" between the two always comes to mind.
While bitcoin and ethereum "do sometimes the same things, sometimes different things," both cryptocurrencies share the same intent of creating a decentralized base layer upon which other applications can be built.
But the focus of the two applications is different. The main idea of Bitcoin is to use payment solutions like the Lightning Network to function as a store of value and medium of exchange, while the idea of Ethereum is to build applications through intelligent design.
2009 is called the "golden age" of the POW consensus algorithm. Because PoW allows anyone with a computer to participate in Bitcoin mining, but due to the GPU and ASIC revolution in 2013, this golden age was declared over.
For Ethereum, the PoW algorithm initially had a positive impact, as this issuance mechanism made ETH "distributed more equitably."
Nevertheless, as a cryptocurrency issuance and distribution mechanism, the value of the PoW algorithm decays "year by year". He categorizes the PoW algorithm as a mechanism that can benefit from the ecosystem, but the mechanism has reached a stage of maturity where the advantages have been waning.
Currently, Ethereum is transitioning to the PoS algorithm of Ethereum 2.0. In this sense, the “Topaz” testnet has the configuration of the ETH 2.0 mainnet. But PoS is not a distribution mechanism, but a mechanism with more advantages in terms of issuance policy.
One of the reasons for the implementation of Proof of Stake is to significantly reduce circulation. Circulation is currently on the decline. If practically everyone participated, the theoretical maximum issuance would be around 2 million per year, this calculation is published in the ETH 2.0 specification.
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New variable: block size
Another important upgrade to the Ethereum network is the adjustment of block sizes based on network activity, rather than transaction fees.
The reason for this is that the base transaction fee will automatically adjust for every 10 million Gas generated on average, but the block size is not always 10 million Gas. In this market, the optimal transaction fee is difficult to predict. For those who do not want to Traders who pay a large transaction fee and thus have to wait for the transaction to be packaged are at a disadvantage. But in reality, this waiting benefits no one, and neither does the network.
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Catalyzing Enthusiasm for the Bull Market
The issue of network scalability and efficiency is an issue that cannot be avoided by mainstream blockchain platforms, and will also determine its future adoption rate and landing prospects. In the face of this problem, Bitcoin (BTC) chose an off-chain expansion solution such as the Lightning Network, Bitcoin Cash (BCH) chose to expand the upper limit of block capacity, and Ethereum (ETH) chose a path that best suits them - Sharding.
Although the original main motivation of Ethereum 2.0 was to expand the network, improve efficiency, and expand the network ecology. But for market investors, it is often impossible to avoid paying attention to the value of ETH. To put it bluntly, will the price of ETH rise as a result?
In the big bull market in 2017, Ethereum deservedly became a "bull market catalyst" or even an "engine" with its hot ICO craze. So this time, the major upgrade of Ethereum 2.0, and its impact on the ecology and network behind it, can it help ETH appreciate, ignite investor enthusiasm, and bring a wave of bull market?
The answer is worth looking forward to. First of all, the PoS staking model is likely to attract a large amount of funds into Ethereum 2.0 for staking to earn rewards. On the one hand, this brings the demand for ETH, and on the other hand, it brings a reduction in circulation. Coupled with the current growth of DeFi projects, more and more ETH will need to be locked in smart contracts as collateral.
Additionally, ETH is gaining popularity among institutional investors. According to the inflow of funds into cryptocurrency fund products by Grayscale in the first quarter, Bitcoin and Ethereum have always been the most favored by Grayscale. However, after January 28, 2020, the speed of capital inflow into Ethereum began to be far greater than the speed of inflow into Bitcoin.
According to cryptopotato.com, as of April 24, 2020, Grayscale owns 13,255,400 shares of the Ethereum trust fund. Calculated at 0.09427052 ETH per share, Grayscale bought 756,239.777 ETH. The latest data shows that the total number of ETH mined from the beginning of 2020 to April 24 is 1563245.875 pieces, which means that Grayscale bought nearly 50% of all mined ETH in 2020. Grayscale also previously outlined growing interest from institutional investors in its report, suggesting that the upcoming Ethereum 2.0 may be behind it.
As the time node approaches, the changes that Ethereum 2.0 will bring to the blockchain and encryption market ecology are more and more worth looking forward to. Although this process is complicated and faces challenges, once it succeeds, it will have great significance to Ethereum and even the entire blockchain ecology.
