Early Bitcoin writer, co-founder of Bitcoin Magazine, fluent Chinese KTV singer, Vitalik Buterin, the first "world computer" proof of concept, described the overall outline of the ETH2.0 super public chain to the encrypted world, the end of this era Will belong to Ethereum.

Ethereum takes shape

He is an "unattractive" young man, early Bitcoin writer, co-founder of Bitcoin Magazine (BitcoinMagazine), fluent Chinese KTV singer, and the proof of concept of Ethereum as a "world computer" for the first time in the original white paper -- Vitalik Buterin. At this time, Ethereum only existed on "drawings".

Vitalik Buterin believes that digital currencies and their associated blockchains can be more convenient than simple P2P electronic value transfers. In order to realize this grand vision (it was rumored that V God liked to play World of Warcraft at the time, and he was very angry after being planned to delete the file, so he had an imagination about the blockchain), he set out to create a complete virtual ecosystem, including global Blockchain and smart contract programming platform, and both will be powered by the native digital currency ETH. In the "decentralized" ecosystem he described, any developer is allowed to develop applications in the system with a high degree of freedom and integrate them on Ethereum. Based on smart contracts, applications on Ethereum can automatically transmit information and value under dynamic conditions, and ultimately build a new Web3.0 network ecology.

At the end of 2013, Vitalik Buterin began to develop Ethereum together with "cryptography geeks" such as Mihai Alisie, Amir Chetrit, Charles Hoskinson, Anthony Di Iorio, Dr. Gavin Wood, Joseph Lubin, and Jeffrey Wilke. After less than two years of development, Ethereum The network mainnet was launched on July 30, 2015. Although Ethereum seems to usher in a new chapter in the ecology, this is only the first step in the long march.

The Early Boom of Cryptocurrencies

After being upgraded in October 2017, Ethereum has entered the metropolis stage, and basically presents a basic outline of Ethereum 1.0, that is, a POW-based decentralized, authorization-free, secure, open-source, Turing-complete, pseudo- Anonymous and token-supply economics. With the ETH token as the core, Ethereum has built an economic ecology, which can not only store value, allow users to send or accept transactions, but also serve as a "loss" chip for any transaction (GAS is calculated in Wei).

Ethereum is based on the friendly Solidity development language, which allows developers to compile smart contracts for automatic execution. Developers can build decentralized applications DAPP based on smart contracts and run on the virtual machine EVM. Similarly, in addition to ordinary users and developers in the system, all transactions in the network are packaged by the miner group into a consensus on the entire network. At the same time, the miners also obtain the ETH token incentives given by the system during this process, forming another big POW forces. In general, Ethereum can operate safely in a highly decentralized form.

Beginning in the second half of 2017, the development of DAPP applications ushered in a small climax, and the issuance of ERC-20 standard tokens based on Ethereum smart contracts became a wave at that time. After the influx of external funds into the Ethereum ecosystem, the cryptocurrency world ushered in a major explosion of currencies. By the end of the year, the total number had reached more than 500, which also laid the foundation for the subsequent development and prosperity of DeFi. Even before the mainnet of other blockchain public chains goes online, ecological tokens will first be issued based on Ethereum, such as EOS and other projects, also "crossover" to its mainnet in the form of "mapping" after the mainnet goes online.

On Ethereum, the eruption of types of cryptocurrencies has further promoted the growth of the total market value of cryptocurrencies. According to Coinmarketcap data: In January 2018, the total market capitalization of cryptocurrencies reached a peak of approximately US$720 billion. The explosion of ERC-20 tokens on Ethereum contributed most of the data. By the end of 2020, the total market capitalization of cryptocurrencies was only Break through the previous high again.

Transaction efficiency and cost

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The average gas consumption chart of a single transaction on the Ethereum chain (source Glassnode)

In July 2018, with the overall cooling of the market and the decline in the popularity of CryptoKitties, the overall transaction volume in the market has dropped, but the average gas consumption of a single transaction has always remained high, with a peak of 0.007ETH, according to the ETH price of 474 US dollars at that time , a single transaction consumes a gas fee of about 3.3 US dollars, which was unacceptable to many investors at that time. However, this is really nothing compared to the level of gas fees after the DeFi outbreak in 2020.

In 2020, high-yield-led liquidity mining will make DeFi explode, creating a FOMO sentiment and a siphon effect. On the bright side, the multi-point blooming of DeFi has made investors clearly aware of the high-quality potential of DeFi and the overall "unfathomable" market capacity of cryptocurrencies. And the outbreak of DeFi has also attracted more and more developers to join the DeFi ecosystem, accelerating the continuous improvement of the infrastructure of the decentralized world. At the same time, DeFi has also transformed from an experiment to a unicorn. However, as the main battlefield of the DeFi world, Ethereum’s own bottleneck also hinders the healthy development of the DeFi ecosystem.

We can see that whether it is AAVE, Compound, MakerDAO, Uniswap and other high-quality DeFi protocols, they are all native applications on Ethereum, and high-quality DeFi protocols are basically "stacked" and built on Ethereum. After entering 2020, the transaction volume on Ethereum began to show an exponential surge. Compared with 2017, when the transaction volume broke out at a certain period of time and fell back quickly, the market after 2020 is more mature and complete, and the average transaction volume is relatively high, and the Ethereum chain will process and delay every day Lots of deals. The consequence of being "overwhelmed" is bound to be a rapid decline in transaction efficiency and a further surge in transaction costs. In terms of transaction efficiency, most DeFi players said, “A transaction on the Ethereum chain may take several hours to be packaged and confirmed after paying an “extremely expensive” GAS during the peak period. And it may have missed the best period of trading."

If the gas cost of $3 in 2018 is considered expensive, the average gas fee after 2020 can be called sky-high. Since March 2020, that is, after Compound launched its own token COMP on Uniswap in the form of liquid mining, the gas fee on Ethereum has experienced several extreme values ​​so far:

0.006ETH on March 12, 2020

0.0166ETH on June 11

0.032ETH on September 2

0.01986ETH on September 12

0.024ETH on February 23, 2021

0.021ETH on May 19

The price of ETH has risen from US$110 in March 2020 to US$4,000 in May 2021, and has now fallen back to around US$2,000. The overall GAS fee is still at a high level, which has also caused a surge in the GAS fee gold standard. The gas fee consumed by the exchange basically ranges from a dozen to tens of dollars. On the other hand, DeFi players often interact with contracts frequently when conducting activities such as liquidity mining or staking, so the GAS consumption of one activity may be multiple times. This has also caused many small and medium investors to earn less than their GAS expenditures. For a period of time, DeFi on Ethereum has also been hailed as a game for big money players.

The culprit of the soaring gas fee and the proposal of EIP1559

Ethereum miners, when packaging and confirming transactions, are not arranged in chronological order. The miner group is an interest group, so when the transaction volume "explodes" in the Ethereum network, the miners often give priority to packaging transactions with higher gas fees. Therefore, many traders, when their transaction has paid a gas fee but has not been confirmed by the network, often further increase the gas fee of this transaction to attract miners to package their own transaction first, so that they have a chance to ensure their own Transactions "priority" are packaged. As a result of this, a large number of ordinary traders' transactions were delayed by the network, and the average gas fee for a single transaction in the network soared. When the amount of Ethereum transactions is too large, there may be a transaction that pays a sky-high GAS fee. After all, for some large accounts, the consumption of GAS fees is not worth mentioning in front of sufficient income.

From the perspective of miners, the income of miners in the Ethereum system mainly comes from three parts, Ethereum block reward + GAS fee income (all gas fees for single currency transactions belong to miners) + index uncle block reward (non-main ). The gas fee has been soaring blindly. Although the miners and big players are earning a lot of money, this has directly led to many DeFi players and developers fleeing Ethereum one after another, and turning to the "next door" BSC, Heco, and the rising star Polygon .

Aiming at the irrationality of the mining gas fee mechanism of the Ethereum system, the community put forward the EIP1559 proposal to alleviate the high gas fee and bring about network disadvantages. The EIP1559 proposal was proposed by Vitalik Buterin in April 2019, so this proposal was not proposed this year.

The EIP1559 proposal changes the income of miners in the gas fee part. Specifically, the network will set a minimum fixed value for the gas fee of a transaction (this fixed value may be appropriately increased with network congestion), and this Part of the GAS fee will not be given to the miners but will be destroyed directly. If users want to package their own transactions first, they can give miners a little "tip" to attract miners to package this transaction first. This also means that in the overall income part of the miners, the gas fee part will be greatly reduced, but in general, this method seems to be able to directly alleviate the plight of transaction congestion in the Ethereum network, and achieve expansion in disguise At the same time, it also brings a destruction scenario to Ethereum to achieve a value inflation.

Although the EIP1559 proposal has been opposed by the vast majority of miners, it may be implemented in the London hard fork upgrade on August 4, 2021 (originally planned to be implemented in July).

The multi-legged support of the DeFi ecosystem

Although Ethereum built the early foundation of DeFi development, Ethereum is not the only choice for developers and DeFi players. Starting from the second half of 2020, the successive launch of the exchange public chain Binance Smart Chain BSC and the Huobi ecological chain Heco mainnet seems to pose a threat to the development of the Ethereum DeFi ecosystem.

Compared with Ethereum, BSC and Heco have certain advantages in terms of transaction efficiency and cost. Usually, the gas fee required for a transaction on BSC or Heco may be only a dozen or a few tenths of that on Ethereum. Binance and Huobi have provided funds for their own DeFi ecology and returned users. Such head platforms can also act as cross-chain bridges to "cross-chain" assets on the Ethereum chain to their own DeFi ecology. So an objective fact is that BSC and Heco did "divide up" part of the funds and users on Ethereum. We will look at a specific situation of these two ecological developments from four indicators including the number of addresses, TVL (locked value) and the number of transactions.

In terms of account address increment, BSC has the fastest growth rate. According to bscscan data, the number of BSC account addresses on February 13, 2021 was 1.387 million, and it surged to 57.065 million on March 3. At present, the total number of accounts The address is 83.8294 million.

The growth rate and total amount of addresses on Heco is lower than that of BSC, and the overall number is also maintaining a high growth rate. At present, the total number of accounts is 16.788 million. Excluding the existence of one user registering multiple addresses, the sudden increase in the number of addresses can fully reflect The case of short-term user increments.

The transaction volume of Ethereum, BSC, and Heco reached its peak in May 2021 (which can be considered as a comparison of similar times), among which Ethereum reached the highest transaction volume of 1.7166 million on May 9, and BSC’s transaction volume on May 14 was 11.8383 million During the same period, Heco’s transaction volume peaked at 4.35 million on May 10. Therefore, in terms of transaction volume, BSC and Heco are much higher than Ethereum as a whole, which has a certain relationship with the high transaction costs on Ethereum. After all, as a user, the income of a certain mining operation on Ethereum, BSC, and Heco is similar, and investors are definitely more willing to conduct it on BSC or Heco, even though some DAPPs on BSC and Heco have higher risks.

According to DeBank data, although there is still some gap with Ethereum in terms of TVL, BSC and Heco have also become two important proportions of the overall TVL of the DeFi ecosystem. After the sharp drop on 5.19, the overall ecological funds of DeFi have accelerated to flee, and TVL has also shown a trend of cutting in half (also related to the decline in currency prices). At present, the TVL amount on BSC is 130.14 billion US dollars, of which PancakeSwap (6.7 billion US dollars), MDEX (1.4 billion US dollars), Ellipsis (1.3 billion US dollars) in the DEX sector and VENUS (1.9 billion US dollars) in the lending sector contributed most of the TVL share And they are also the first echelon applications of the overall DeFi sector.

The TVL on Heco is US$2.09 billion, of which MDX (US$1.5 billion) is the main share.

It is worth noting that Polygon, as a Layer 2 echelon, has also gathered a large amount of funds. The overall TVL has reached 5.5 billion US dollars. Many DeFi applications on Ethereum such as AAVE, Curve, Balancer V2 and SushiSwap have begun to be integrated into Polygon synchronously. It also makes Polygon a giant ecology comparable to Ethereum and BSC in the current DeFi sector.

In general, in the competition on the DeFi track, ecosystems such as BSC and Heco have built the prosperity of the DeFi world as a whole, and at the same time formed a multi-legged situation.

Layer 2 with indirect expansion

The main problem of Ethereum is its own carrying capacity. After all, all transactions and interactions of Ethereum are currently carried out on the main chain Layer1, which makes Ethereum, which has a low TPS, overwhelmed. Around the expansion of Ethereum, there are currently two completely different solutions in essence. One is the Layer 2 solution for indirect expansion, and the other is the direct expansion solution ETH2 that we are all looking forward to and is already in the planning of Ethereum. .0. At present, ETH2.0 has opened the beacon chain and entered the ETH1.X stage, but the overall development progress is difficult to accurately estimate, so it is currently on the eve of ETH2.0, so the expansion of Ethereum currently uses Layer 2 as the main means. Vitalik Buterin, the founder of Ethereum, also highly recognized Layer 2 and believed that Layer 2 may coexist with ETH2.0.

In general, the main idea of ​​Layer2 is to build a "channel" around the main chain of Ethereum, that is, a two-layer network, and move the large amount of computing needs of Layer1 to Layer2 to further relieve the pressure on the main chain of Ethereum Layer1. Layer 2 also has a variety of solutions as a whole, which is like relieving traffic pressure on a public chain. It can either build a small road next to the public chain and finally converge to the main road, or build an overpass to divert traffic. In short, the ultimate goal It is to relieve the pressure of the large traffic flow on the road.

Currently, the overall Layer 2 solution includes side chains, Plasma, Rollup, and Validum. Among them, the Rollup scheme that is currently favored by the industry can be further divided into Optimistic Rollup (multi-round interactive Arbitrum Rollup), ZK Rollup, zkPorter, and starknet several Layer 2 schemes. Usually, when users want to trade on Layer2, they often need to transfer their assets to Layer2, and the funds will eventually need to be withdrawn from Layer2 to Layer1.

Different Layer 2 solutions actually have different advantages and disadvantages. Matter Labs previously compiled a comparison of the overall advantages and disadvantages of each Layer 2 solution.

The Plasma scheme has good overall security, and at the same time, this scheme is less interactive than the main chain, so its transaction efficiency is higher. The disadvantage is that it does not have the data availability of the main chain, and users need a 7-10 day withdrawal period to withdraw funds to Layer1. In contrast, the asset withdrawal period of the ZK Rollup scheme is short and highly secure, but it does not support smart contracts as a whole, while Optimistic Rollup supports smart contracts, but similar to Plasma, there may still be more assets withdrawn from Layer 2 to Layer 1 Up to 1 week, reducing the utilization rate of user funds.

In terms of the progress of the Layer 2 sector, the Optimistic Rollup mainnet has been launched, and the DEX giant Uniswap on Ethereum has launched Optimistic Rollup. Arbitrum Rollup was launched on the mainnet on May 28. OKEx has announced that it will support Arbitrum, and according to the voting results, Uniswap V3 will also be migrated to Arbitrum.

At present, the Layer 2 member with the fastest progress on the Layer 2 track is Polygon. As mentioned above, including AAVE, SushiSwap, etc., have deployed their own applications on Polygon. At present, the number of Polygon addresses exceeds 23.4886 million, and the peak daily transaction volume reaches 9.177 million , the overall number of DAPPs exceeds 100, and many development teams are also developing applications based on Polygon.

On the eve of the advent of ETH2.0, Layer 2 is the most effective expansion solution for Ethereum, and it is likely to become a part of ETH2.0 in the future to jointly promote the overall development of the ecology.

Before the arrival of ETH2.0, the "superiority" of Ethereum still exists

Although the performance of the Ethereum main chain is not good in terms of carrying capacity, the data display is still far ahead of other ecosystems. As far as the current TVL is concerned, the overall TVL of DeFi is 73.82 billion U.S. dollars, and the current overall TVL of Ethereum is 52.65 billion U.S. dollars.

The "unicorn" DeFi applications on Ethereum are also "clustered together". According to DeBank data, there are currently 10 applications on Ethereum with a TVL exceeding US$1 billion, namely AAVE, Compound, Curve, MakerDAO, Uniswap, SushiSwap, ShibaSwap, Synthetix, Liquity, and Bancor basically occupy half of the "unicorn" camp.

Stablecoins play a very important role in DeFi, and cryptocurrencies as a whole are characterized by high volatility. As a stable encrypted asset anchored to the US dollar and characterized by extremely small fluctuations, the stable currency has perfectly become a bridge between encrypted currency assets. At present, more than 70% of the 10 stable currency sectors including USDT, DAI, PAX and USDC are settled on Ethereum, and they were issued on Ethereum in the early stage. At present, the overall circulation of stablecoins is on the rise. At the same time, the number of pledged stablecoins in DeFi protocols on Ethereum also occupies a dominant position, such as MakerDAO, Curve, and Convex. Such protocols related to stablecoins are all Ethereum Native applications on the market.

Many DeFi applications on Ethereum started relatively early, especially lending and DEX sectors. For example, as early as 2017, ETHLend, the predecessor of AAVE, had been deployed on Ethereum, and it was renamed AAVE in late September 2018. Similarly, as a decentralized organization on Ethereum, MAkerDAO launched its own protocol as early as 2017. Bancor in the DEX sector launched the Ethereum mainnet in June 2017, and Uniswap launched the Ethereum mainnet in 2018 and became the originator of the AMM model, etc. Ethereum built the early foundation of the DeFi world, and the important role of Ethereum in the overall DeFi ecosystem also makes the foundation of Ethereum difficult to shake.

The "superiority" of Ethereum is also reflected in the "ideology" of the blockchain world. In fact, Ethereum is more like a first-tier city, or an ancient cultural city with culture and heritage. The formation of the ecology on Ethereum is different from other ecology, and its prosperity does not happen overnight. Although the city as a whole is relatively congested, the city's overall economy is prosperous and its culture is long.

As far as the current Ethereum is concerned, Ethereum itself is the most prominent model of DAO autonomy, and the entire ecology is completely decentralized. The overall number of nodes in Ethereum exceeded 12,000 at its peak, and the Ethereum Foundation has no ability to control the nodes. The completely decentralized and truly highly autonomous ideology established by Ethereum is unmatched by other ecosystems. This ideology promotes more innovation and increment on Ethereum, which is the most unique charm of Ethereum and the foundation of its foundation.

The light of the times may also be the death of the miners.

The POW miner group has always been a powerful force in the cryptocurrency field, and it is also an important role in the Bitcoin and Ethereum ecology. Driven by interest factors, the miner group "grows wildly" in the early stages of the industry.

At present, the POW miners are facing the severe situation of "internal troubles" and "foreign troubles", especially the POW forces in the Ethereum ecosystem. The outbreak of DeFi has caused a blowout in the transaction volume in the Ethereum ecosystem. With the simultaneous skyrocketing of the price of Ethereum and the gas fee for a period of time, Ethereum miners are making a lot of money, but this may be the last carnival.

Starting from the first half of 2021, the red light on the POW mining method in China has been turned on. POW consumes a lot of energy and is contrary to the concept of carbon synthesis, and the policy has begun to attack it with all its strength. As of the beginning of July, the computing power of Ethereum in the whole network has dropped to 487TH/s. Among them, the computing power of domestic Ethereum has dropped by 17% as a whole, which has also caused a sharp drop in the price of graphics cards. The overall external situation has accelerated the development of domestic Ethereum POW miners. At the same time, it is difficult to find a way out for the mining machines used in mining.

The further implementation of the EIP1559 proposal may reduce the overall revenue of miners. With the launch of the ETH2.0 beacon chain, more and more people join the ranks of POS miners, which makes the situation faced by Ethereum POW miners worse. Although at the current stage, ETH2.0 is only phase 0, and the current POS is only for testing, ETH1.0 is still based on POW. However, from the perspective of the overall planning of ETH2.0, the POW chain is also the current ETH1.0 chain, and the POW chain will be incorporated into ETH2.0 as a fragment in the 1.5 stage. This stage is expected to be completed after 2022. The whole network is gradually transferred to POS, which may gradually make Ethereum POW miners a thing of the past. The glory of the past may also be the death of the miners.

Features of ETH2.0

Although the Layer 2 solution can expand the capacity of Ethereum to a certain extent, ETH2.0 can cure the "disease" of Ethereum. As early as the design stage of Ethereum, ETH2.0 has already planned to the fourth stage of the development route.

In general, ETH2.0 has built a blockchain system with 64 shards, and at the same time, its own POW consensus mechanism has shifted to POS. Fragmented chains can greatly improve the transaction processing capabilities of Ethereum itself. ETH1.0 is a main chain that handles all transactions, resulting in low efficiency. ETH2.0 allows 64 shards to process transactions in parallel. The system as a whole uses the beacon chain as the hub chain, which will become the link for two-way communication and information transmission between fragments.

Although traditional POW can guarantee decentralization and security, POW does not meet green energy standards. POS has a huge advantage in saving energy, and relatively speaking, POS also improves the security and scalability of the network. After entering the POS consensus mechanism, the threshold for becoming a node in the network is further reduced. You only need to pledge 32 ETH and run the official client. POS further improves the degree of decentralization of the ETH network.

ETH2.0 is also a very large project, which is divided into four stages as a whole:

Phase 0: The beacon chain goes live.

Phase 1: Sharding and data sharding.

Phase 1.5: 64 shard chains are connected to the beacon chain, and the current Ethereum chain becomes one of the shards.

Phase 2: Ethereum began to integrate and improve the system (transfer and other functions), and gradually completed 2.0.

What problems does ETH2.0 solve?

ETH2.0 has rebuilt the network structure of Ethereum. By building shards and transferring the consensus mechanism to POS, its network efficiency has been qualitatively improved. This may be further reflected in the substantial improvement in transaction efficiency and transaction costs. decline. Switching from traditional POW to POS has lowered the node threshold and attracted a large number of ordinary investors to become validators, avoiding the internal security problems caused by the concentration of computing power, and further enriching the group composition in the Ethereum miner ecology .

From the perspective of DeFi, the DeFi ecology was originally built on Ethereum in the early days. ETH1.0's own efficiency problems hindered the further development of the ecology, which was reflected in the sluggishness of developers in building DAPPs and the flight of traders. The ETH2.0 network is expected to further promote developers to actively build high-quality applications on Ethereum, and realize the further prosperity and expansion of the Ethereum DeFi ecosystem. Of course, in addition to the Layer2 sector, systems such as BSC may complement ETH2.0.

Ethereum can become a king ecology in the early days, and ideology is an extremely important link. Ethereum 2.0 has built a strong overall foundation for Web3.0, achieving breakthroughs under the framework of the impossible triangle of scalability, security, and decentralization, and further deepening the influence of this ideology.

In general, ETH2.0 not only solves the scalability, security and energy consumption problems faced by ETH1.0. Ethereum 2.0 is a qualitative change in the overall form of blockchain technology. The emergence of ETH1.0 has built a basic outline of the blockchain model and has become a reference for other blockchain systems. The emergence of ETH2.0 further redraws the basic outline of the blockchain model and triggers a new round of technological innovation in the blockchain itself. Just like the huge productivity brought about by every round of industrial revolution, ETH2.0 will also trigger a new round of changes in the blockchain industry as a whole, and lead the direction of real blockchain value.

Beacon Chain Launch

On November 4, 2020, the Ethereum Foundation released the ETH2.0 beacon chain deposit contract, and plans to launch the beacon chain on December 1, provided that the deposit contract needs to obtain 524,288 ETH 7 days before the creation date, That is, 16,384 verifiers participate in the genesis launch, and the beacon chain can be launched on time. On November 23, the conditions for the 16,384 verifiers were met in the beacon chain deposit contract, and the beacon chain was launched on December 1 as scheduled to open phase 0 of ETH2.0.

At present, we can transfer Ethereum on ETH1.0 to the beacon chain and become a verifier by running the official ETH2.0 client. The minimum threshold for a verifier is 32 ETH, but the pledge is not completed before phase 4 It is unidirectional and irreversible. According to beaconcha.in data, 6,260,027 Ethereum have been successfully pledged on the beacon chain.

ETH2.0 depicts to us the overall outline of a "super" public chain system, which may be Vitalik Buterin's ultimate vision for a "world computer", but just like when a mobile phone is upgraded from 3G to 4G, all we can think of is that the network speed is faster. Fast, what really changes is the earth-shaking changes in the communication age. For Ethereum 2.0 in the encrypted world, the gas may be lower, but what about the future?

The era will eventually belong to Ethereum.