Speaking at the Permissionless 2022 Conference in Florida, the U.S., Ethereum Researcher Justin Drake disclosed that the merge of Ethereum (ETH) might happen in August.
Market insight provider Bankless pointed out. He noted:
“Strong desire to make this happen before difficulty bomb in August. Stars are aligned.”
Meanwhile, Ethereum core developer Preston Van Loon shared similar sentiments that testing was in the final stages and said:
“As far as we know, if everything goes to plan, August—it just makes sense. If we don’t have to move, let’s do it as soon as we can.”
The merge, which will transition the current proof-of-work (PoS) consensus mechanism to a proof-of-stake (PoS), has been elusive because it was slated for June.
Previously, Ethereum lead developer Tim Beiko revealed that the shift would not happen in June as planned. He pointed out:
“It won’t be June, but likely in the few months after. No firm date yet, but we’re definitely in the final chapter of PoW on Ethereum.”
The merge is estimated to be the biggest software upgrade in the Ethereum ecosystem because the PoS algorithm will allow the confirmation of blocks in a more energy-efficient way. After all, it requires validators to stake Ether instead of solving a cryptographic puzzle.
Validators will take up the role of miners when it comes to the confirmation of blocks based on the amount of ETH staked, acting as collateral against dishonest behaviour.
The merge is usually regarded as a game-changer that will give the Ethereum network a new face because it is expected to enhance scalability through upgrades like sharding.
Furthermore, it is anticipated to strengthen Ethereum’s quest as a deflationary asset because the second-largest cryptocurrency’s value is speculated to increase based on slashed supply.
Market analyst Lark Davis had previously opined that he expected the merge to trigger a supply growth rate of -2.8% in the Ethereum network. Moreover, a LuckyHash study noted that the shift would prompt a 1% annual deflation rate.
Ethereum 2.0, which was recently renamed the consensus layer, continues to gain steam because 12,059,714 ETH has been staked in its deposit contract.
This represents 10% of the entire circulating Ethereum supply of 120,585,605 ETH, according to CoinMarketCap. Ethereum 2.0, also known as the Beacon Chain, was launched in December 2020 and was regarded as a game-changer that sought to transit the current proof-of-work (PoW) consensus mechanism to a proof-of-stake (PoS) framework.
The proof-of-stake algorithm is touted to be more environmentally friendly and cost-effective. It allows the confirmation of blocks in a more energy-efficient way because it requires validators to stake Ether instead of solving a cryptographic puzzle.
Therefore, validators will take up the role of miners when it comes to the confirmation of blocks based on the amount of ETH staked, acting as collateral against dishonest behavior.
The transition from PoW to PoS is known as the merge and will act as the biggest software upgrade in the Ethereum ecosystem. Ethereum lead developer Tim Beiko recently disclosed that the merge would not occur in June as planned.
This revelation came days after the first shadow fork that served as the merge trial went live on the Ethereum mainnet. It was to stress test syncing and state growth on the ETH network. The merge is being waited with bated breath because it will enhance Ethereum’s quest to be a deflationary asset. Its value is expected to continue increasing with time on the foundation of slashed supply.
As more investments continue trickling into Ethereum 2.0 deposit contract, confidence in the ETH network is rising in anticipation of the merge.
The number of validators on the Ethereum network continues gaining steam after hitting the 300,000 mark.
Moreover, staked Ether crossed the 9.5 million level to reach 9,599,919 ETH.
Ethereum 2.0, recently renamed to the consensus layer, intends to transition the network to a proof of stake (PoS) consensus mechanism from the current proof of work (PoW) framework.
Therefore, validators will take up the role of miners when it comes to the confirmation of blocks based on the amount of ETH staked, given that it acts as collateral against dishonest behaviour.
The transition is slated for Q2 2022, and the PoS consensus mechanism is expected to make the Ethereum network more environmentally friendly and cost-effective.
Furthermore, this shift is expected to trigger a 1% annual deflation rate, accordingto research by crypto service provider LuckyHash.
Non-Zero ETH addresses continue to skyrocket
More participants continue joining the ETH ecosystem, given that the number of non-zero addresses is going through the roof. Market insight provider Glassnode explained:
“The number of non-zero addresses just reached an ATH of 75,960,332.”
Source: Glassnode
Meanwhile, burnt Ether edges closer to the 2 million mark. 1,922,687 ETH has already been burned, according to crypto insight provider DuneAnalytics.
Launched in August 2021, the London Hardfork or EIP 1559 introduced a feature where Ether would be burnt every time it is used in transactions. This has been causing a supply deficit, which prompts a price increase whenever demand rises.
This upgrade also eliminated the usage of other digital tokens for fee payment in the Ethereum Network. Only Ether would be used, thus restoring the unique relevance of the ETH cryptocurrency. Inflationary tendencies were also eradicated.
“Ethereum adoption is not only about big players. The number of addresses holding between 0.1-1 ETH is currently at an at time high (ATH). In the span of 1 year, the number of these addresses increased by 98%, and now they collectively hold 1.78m ETH (increasing by 4.54% in 1 month).”
Source:IntoTheBlock
Therefore, Ethereum adoption isn’t showing signs of slowing down because addresses having 1 to 10 ETH recently attained a new milestone by hitting the 1 million mark.
Booming sectors like decentralized finance (DeFi) and non-fungible tokens (NFTs) are increasing Ethereum’s use cases.
Meanwhile, more investments continue trickling into the recently rebranded ETH 2.0 deposit contract. Crypto analytic firm Glassnode noted:
“The total value in the ETH 2.0 deposit contract just reached an ATH of 9,390,050 ETH.”
Source:Glassnode
Last month, the Ethereum Foundation rebranded ETH 2.0 to the consensus layer to reflect the evolution of the Ethereum roadmap because it had emerged as an inaccurate representation. Furthermore, Ethereum 1.0 was changed to the execution layer.
The consensus layer seeks to transition the Ethereum network from a proof of work (PoW) consensus mechanism to a proof of stake (PoS) framework, deemed more environmentally friendly and cost-effective.
On the other hand, Ethereum needs to break the resistance level at $3,500 for sustained bullish momentum. The second cryptocurrency based on market capitalization has not been able to surge above the psychological price of $4,000 since November 2021 when an ATH of $4,850 was set.
“Ethereum is well-positioned to advance higher as IntoTheBlock’s IOMAP shows a small supply barrier at $3,500. Once $ETH breaks above it, expect fireworks,” according to market analyst Ali Martinez.
Ethereum 2.0 is one of the most-anticipated upgrades in crypto presently. The upgrade which will bring better scalability and cheaper prices to the network is nothing short of needed given that demand has driven these two things to its brink on the network. This is why Ethereum developers have been hard at work for two years trying to usher in this new era.
However, it seems that the name ETH 2.0 is no longer doing justice to the upgrades being performed on the network. In a recent announcement, Ethereum Foundation announced that it is retiring the name ETH 2.0 in favor of something that better describes the work being done on the network.
ETH 2.0 Is Now Consensus Layer
In a blog post on its official website, the Ethereum Foundation announced its decision to change the name of the upcoming upgrade from ETH 2.0 to the “Consensus layer”. The post explains that the reason for this was the need for terminology that clearly embodies the changes that were being made to the network.
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ETH 2.0 had worked while at the beginning when the goal was simply to move users from the present proof of work chain, also known as ETH 1.0, to the new proof of stake mechanism. The goal has changed drastically since then.
For the total completion of the upgrade, developers had discovered that it would take several years to complete. Additionally, the upgrade had evolved at various points to make changes focused on the long-term rather than just moving to the proof of stake mechanism.
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ETH climbs back to $2,400 | Source: ETHUSD on TradingView.com
The new terminology provides a better understanding of what is being done on the network. This way, users are no longer confused when it comes to distinguishing between the two. This would greatly reduce scams that take advantage of the confusion generated by the terminology by asking them to swap their ETH for ‘ETH2’. It would also clear up the confusion that arises with staking, where stakers might believe they might be getting ‘ETH2’ tokens and not ETH tokens.
How Is Ethereum Price Affected?
The announcement of the new terminology has had no bearing on the value of the altcoin in the market. Ethereum which had suffered greatly in the crash, losing about 40% of its value, has trended upward in the last day. However, the change in value remains insignificant as ETH is still a long way away from hitting the $3,000 point. Prompting users to speculate that the bear market is here.
Related Reading | Market May Be Suffering But Bitcoin And Ethereum Will Pull Back Stronger, Bloomberg Analyst
As for ETH 2.0, now known as the “Consensus layer”, it is still unknown if the scheduled merge will actually take place this year. The project has so far been rocked by delays as devs encounter new issues. But for now, the upgrade remains on track.
As per the announcement, the ethereum base layer, also known as ETH1, will now be called the execution layer. While ETH 2.0 will be referred to as the consensus layer. Both of these layers combined are what make up the Ethereum blockchain.
Featured image from Forkast, chart from TradingView.com
Ether (ETH) price lost the $3,600 support on Jan. 5 as minutes from the Federal Reserve’s December FOMC meeting showed that the regulator was committed to decreasing its balance sheet and increasing interest rates in 2022.
Even with that looming overhead, Ether has problems of its own, more specifically, the ongoing $40 and higher average transaction fees. On Jan. 3 Vitalik Buterin said that Ethereum needs to be more lightweight in terms of blockchain data so that more people can manage and use it.
The concerning part of Vitalik’s interview was the status of the Ethereum 2.0 upgrade, which is merely halfway implemented after six years. The subsequent roadmap phases include the “merge” and “surge” phases, followed by “full sharding implementation.” When implemented, they will lead to an 80% estimated completion of the network upgrade, according to Buterin.
Ether price at Coinbase, USD. Source: TradingView
For those analyzing Ether’s performance over the past 3 months, the current pricing seems appealing because the cryptocurrency is currently down 34% from its $4,870 all-time high. However, this short-sighted view disregards the 560% gain Ether had accrued up till Nov. 10, 2021.
Furthermore, the network’s adjusted total value locked (TVL) has dropped by 17% since Ether’s price peak.
Ethereum network total value locked, USD. Source: DefiLlama
As shown above, the network’s TVL dropped from $166 billion to the current $138 billion. Meanwhile, competing smart contract networks like Terra saw their TVL increase from $11 billion to $18.7 billion. Fantom also increased the value locked on its smart contracts from $5 billion to $9 billion.
Due to network upgrade delays, worsening macroeconomic conditions and a 3-month long price correction, professional traders are clearly becoming frustrated and anxious.
Ether futures are at the edge of turning bearish
Quarterly futures are usually the preferred instruments of whales and arbitrage desks due to their settlement date and the price difference from spot markets. However, the contract’s biggest advantage is the lack of a fluctuating funding rate.
These fixed-month contracts usually trade at a slight premium to spot markets, indicating that sellers request more money to withhold settlement longer. Therefore, futures should trade at a 5% to 15% annualized premium in healthy markets. This situation is technically defined as “contango” and is not exclusive to crypto markets.
As displayed above, Ether’s futures contracts premium has come down from 20% on Oct. 21 to a meager 5.5%, just slightly above the neutral market threshold. Although the basis indicator remains positive, it reached the lowest level in 6 months.
The crash below $3,000 on Jan. 10 was enough to drain any bullish sentiment and more importantly, the Ethereum network’s high fees and delayed upgrades might have scared away some investors.
Currently, data shows little sign that bears are ready to take the helm. If this was the case, the Ether futures premium would have turned negative.
The views and opinions expressed here are solely those of theauthorand do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.
The Ethereum 2.0 deposit contract currently contains 9,008,082 ETH, or about $30.2 billion.
This deposit contract allows users to transfer funds from Ethereum mainnet to Beacon Chain, a parallel Proof-of-Stake network.
Ethereum is expected to switch to Proof-of-Stake with a proposed merge with Beacon Chain, tentatively scheduled in June 2022.
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As of today, the Ethereum 2.0 deposit contract contains about 9 million ETH, equivalent to about $30.2 billion.
Users Stake $30 Billion For ETH 2.0
9 million ETH have been locked in the Ethereum 2.0 deposit contract.
This deposit contract allows users to transfer funds from the Ethereum Proof-of-Work mainnet to Beacon Chain, a parallel-running Proof-of-Stake version of the blockchain. The Ethereum core team has operated Beacon Chain since Dec. 1, 2020 in addition to the Proof-of-Work mainnet that currently hosts all Ethereum dApps.
The highly-anticipated “merge” refers to the future event in which the Ethereum mainnet begins using the Beacon Chain for consensus, effectively eliminating Proof-of-Work within the Ethereum ecosystem.
According to the latest on-chain data on Etherscan, 9,008,082 ETH have been locked in Ethereum 2.0 deposit contract. At current ETH prices, the deposits represent about $30 billion staked under the initial phase of Ethereum 2.0–also known as Serenity.
The deposited 9 million ETH has been contributed by more than 280,000 validators on Beacon Chain. To become a validator, a user needs to deposit a minimum of 32 ETH, valued at around $108,000 currently.
Ethereum’s Future Roadmap
Ethereum, the largest public blockchain, is planning to switch to Proof-of-Stake–a consensus system that requires validators to stake their funds on the network in order to validate new transactions. In comparison, the present consensus mechanism, called Proof-of-Work, validates transitions using miners that leverage computing power from specialized hardware chips to solve complex computational problems.
It is hoped that the phased upgrade to Proof-of-Stake may lead to faster, cheaper, and more energy-efficient transactions on the blockchain. ETH 2.0 will also open Ethereum to sharding, a scaling mechanism in which the network is split into smaller portions.
Recent Updates: Arrow Glacier & Kintsugi
Before merging the two chains, the Ethereum community has been working on tooling to ensure a smooth transition and to check for potential bugs in the rollout.
Two important events took place in December 2021 in the lead-up to the Proof-of-Stake merge. The first was the Ethereum Improvement Proposal-4345. Codenamed Arrow Glacier, the EIP-4345 was initiated on Dec. 8. This upgrade postponed Ethereum’s“Difficulty Bomb”until June 2022 from its earlier planned date set in December.The Difficulty Bomb is a planned feature that will make Ethereum Proof-of-Work mining more difficult and less profitable. The mechanism is intended to ensure a smooth transition to Proof-of-Stake by disincentivizing resistance from miners. The EIP-4345 update also specified a timeline suggesting that the Proof-of-Stake merge could occur by June 2022.
Second, On Dec. 20, Kintsugi, a public testnet for ETH 2.0, was introduced. Aiming to find potential bugs, this testnet allowed the Ethereum community and users to publicly experiment with post-merge Ethereum. On Tuesday, Ethereum developer Marius van der Wijden reported in a Twitter post that the team had found and fixed bugs in ETH 2.0 client software that affected nodes’ ability to sync themselves with the network.
The exact date of the merge is still unknown, but it is widely anticipated to take place this year and is tentatively scheduled for June.
Disclosure: At the time of writing, the author of this piece owned ETH and other cryptocurrencies.
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Ethereum 2.0 has been long in the making ever since the Beacon Chain went into operation in 2020. Since then, there have been numerous upgrades made to prepare the network for the final proof of stake move. Most recently of this has been the Kintsugi testnet that allows users of the blockchain to get a glimpse of what is to come when “The Merge” finally happens.
It has been a year since the move to ETH 2.0 was set into motion and there have been some notable happenings since then. In this article, we’re going to look at the year in review and all that has happened with the network since then.
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Over 7% Of ETH Supply Staked
Staking on the Ethereum network has ramped up since the move to proof of stake was announced. Instead of requiring miners to compete and verify blocks like in proof of work, the network now requires validators who need 32 ETH to run a node. Each validator gets rewarded for helping confirm transactions in the network and making it safer to use.
The number of ETH staked on the network had quickly reached 5% of the total supply less than a year after the Beacon Chain was launched. December marks a complete year after the launch and there are now over 8.6 million ETH staked on the network worth a total of $33.5 billion. The number of validators has also grown to over 271,000 in this time.
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7.33% of ETH supply staked | Source: Arcane Research
There is now a total of 7.33% of the total supply of ETH staked on the Ethereum network and this number is expected to grow in the coming months as it moves closer to the merge. After the merge is completed, APY is expected to increase due to unburnt fee revenue and MEV which will now go to stakers instead of miners in the new proof of stake mechanism.
Ethereum Moving Towards The Merge
The race towards complete merge with Ethereum 2.0 is still on but there has been some infrastructure put in place to ensure that the network gets there. One of those is the multi-operator validator network, Lido, built by the Obol Network. This allows for liquid staking tokens on the ethereum network.
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Rocket Pool is also another decentralized staking service that went live on the main net. These two have been part of helping the network push towards 2.0 while making it easier for users to stake their tokens.
On Monday, the Kintsugi testnet was released. It is the first public testnet of significance that was released on ethereum and will precede some other testnets to come, that show how the network will work after the merge.
ETH continues downtrend | Source: ETHUSD on TradingView.com
Featured image from BitcoinKE, chart from TradingView.com
Thanks to the proof of stake (PoS) consensus mechanism, a greener future is on the horizon for Ethereum, which will make the efficiency of the network two thousand times more.
“With proof-of-stake being aorund 2000 times more efficient than proof-of-work, the energy expenditure of Ethereum will be roughly equal to the cost of running a home computer for each node on the network.”
The Ethereum Foundation also acknowledged that the PoS framework would trigger a 99.95% reduction in total energy use.
The Ethereum network uses a proof-of-work (PoW) system where miners solve a computational puzzle to validate a block.
Nevertheless, for the PoS consensus mechanism, validation of blocks is dependent on the amount of ETH staked because it is used as collateral against dishonest behaviour. Furthermore, validators will be required to have 51% of the total ETH staked running in the network to maintain a fraudulent blockchain.
The Ethereum Foundation stated that a transition to the proof of stake from the present proof of work is expected to happen in the second quarter of 2022. However, the Ethereum 2.0 deposit contract launched in December 2020 shows the viability of the PoS consensus mechanism.
Meanwhile, the proof of stake framework has gained steam in 2021 based on some of the advantages it presents, like cost-effectiveness and environmentally friendliness.
As a result, PoS networks like Solana, Polkadot, and Cardano are opening opportunities for staking-as-a-service (STaaS) providers.
With staking involving locking up crypto assets for a certain period of time to earn interest or rewards, this market is experiencing significant growth. For instance, Solana recently emerged as the most staked crypto with a value of $78.49 billion.
The Ethereum 2.0 upgrades of the consensus layer built by multiple teams in the ecosystem promise to bring a “more scalabe, more secure, and more sustainable Ethereum”, and now Vitalik Buterin celebrates 1 year since the proof-of-stake Beacon Chain went live. Eth2 or Serenity aims to “support 1000s of transactions per second” so the high gas fees problem can be solved.
The Beacon Chain, one of Ethereum 2.0’s distinct sections, has allowed users to be Eth2 validators by staking Ethereum, reportedly earning up to 10% annually, diminishing miners for transaction validation, and adding new blocks.
Ben Edgington, the lead product owner of the Teku Eth 2.0 client, had explained that “Slashing penalties were reduced at the start of the Beacon Chain to increase stakers’ confidence. Now that we are all much more comfortable with staking, penalties are gradually being increased towards their ‘crypto-economically correct’ values.”
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The August update in the London hard fork proceeded to implement EIP-1559, changing the transaction fee system. Like so, the ETH burning started, which now sees a total of 353,615.108.19
Related Reading | Over 1 Milllion ETH Has Been Burned Since Ethereum EIP-1559
Eth 2.0 Roadmap At The Beacon Chain’s Birthday
The next stage, The Merge, is possible to happen around May or June next year if the code is completed by February. This will ‘merge’ the Beacon Chain into the mainnet. As it has been explained, it is meant to finalize the transition to PoS, “Ethereum’s history on the PoW network will be preserved as the PoS consensus layer is merged in as a replacement for PoW.”
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Buterin Vitalik publishes an updated roadmap diagram of Ethereum protocol development’s current state
Tim Beiko stated that “the Arrow Glacier upgrade is scheduled for block 13,773,000, which is expected on December 8, 2021”, and called for users to upgrade their nodes. He expects the Kintsugi devnet to go live early this month, this is intended to “implement a release candidate design for The Merge”, which would be followed by “testing, risk management, and governance”.
Both Beiko and Edgington have said that Ethereum devs are mainly focused on the Eth2 final steps.
The move to proof-of-stake will not immediately provide any significant extra throughput to the Ethereum chain, so I don’t expect it to have a measurable effect on gas prices. The scalability strategy in Ethereum now revolves around layer-two solutions like the various roll-ups that are currently being deployed. Once The Merge is done, we will focus on providing data shards within the Ethereum protocol that will allow roll-ups to scale massively.
Obol Labs image tweeted by Collin Myers
Project lead of Obol Labs, Collin Myers, was glad to see Distributed Validator Technology (DVT) “on the top” of Vitalik’s Eth2 roadmap, and explained it as a new infrastructure that enables “Active-Active redundancy across Eth2 infrastructure deployments”, and suggested “a world where validator key theft becomes nearly impossible due to applied cryptography”.
We believe a more resilient Ethereum can be realized through a collaborative infrastructure protocol that protects against the disappearance of a few network operators. DVT can an enable this by allowing a group of network operators to act as one single validator together – something we like to call a multi-operator validator.
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Ethereum price at $4,536 in the daily chart | Source: ETHUSD on TradingView.com
