Ethereum’s co-founder, Vitalik Buterin, sees the Ethereum network scaling by a 100 factor and predicts the release of Optimism’s layer-two solution in the next few weeks.
Buterin noted that Eth2 development projects concentrate on developing the chain melting with Ethereum onthe Tim Ferriss podcastand are adamant that layer-two solutions will sustain the network before the sharding establishment. Sharding helps with the network’s capacity to process transactions and store data.
Eth2.0 Developments
In October, aTwitter threadrevealed that the Eth2 roadmap was getting an update, and the scaling improvements would arrive sooner than previously anticipated. They would introduce the concept of rollups and combine it with sharding to create a synergistic effect to turbo-charge the Ethereum network capacity.
In the podcast, Vitalik shed light on rollups. He said that rollups are coming very soon, and they are fully confident that by the time they need any more scaling of that, sharding will have already been ready for a long time by then.
Rollups are secondary solutions to process and store transaction information on a specified side-chain before bundling transaction batches into the mainnet in Ethereum. The solutions aim to alleviate the scale-up of Ethereum, which resulted in fierce bandwidth competition on the Ethereum mainnet in high fees.
Whereas Eth2 uses sharding to ensure scalability when fully rolled out, Buterin claims that rollups are enoughto increasethe transactional performance of Ethereum by 100 times.
He added that you still have the blockchain’s ability to go up to somewhere between 1,000 and 4,000 transactions a second, depending on how complex these transactions are.
Optimism Rollups Will Launch Soon
Buterin continued to predict that Optimism is to launch itsfullyEVM-compatible Virtual Machine in a month. He also underlines Arbitrum’s significant achievements in its EMV-compatible rollouts.
Optimistic rollups rely on fraud evidence to avoid invalid state transfers. Some DeFi industry leaders will welcome them, and analysts speculate that the future Uniswap V3 update will use this. One of the first projects to use the technology will be Aave andSynthetix.
Ethereum CEO added that there are simpler rollups that can only process basic transactions exchanged between assets such as Loopring and zkSync. These rollups have been stable for approximately a year now — even rollouts are not theory. For nearly one year, they were a functional part of Ethereum’s scalability for a few users.
Last week, Buterin made the draft system to direct smart contract protocols across various layer-two scaling solutions. As the Ethereum network is bringing staking abilities to the crypto space, the blockchainDeFiworld has been getting flooded with investors. As the community is commonly seeking each of these features, the hype around Ethereum becomes even more apparent.
Ethereum’s second-layer solution Loopring was used to make 40,000 transactions in just one day.
This is equal to roughly 3.25% of Ethereum’s mainnet transactions during the same time.
As Ethereum fees keep growing, second-layer solutions are becoming increasingly prevalent, experts noted.
Loopring, a second-layer solution on Ethereum (ETH), was used to make 40,000 transactions yesterday—that equals to 3.25% of transfers conducted on the Ethereum mainnet that day.
“When the gas gets going, Ethereum L2 gets rolling. More Loopring zkRollup transactions yesterday than any day before. ~40k txs. That’s quite a lot,” Loopring tweeted.
The developers added that around 1.23 million transactions were conducted on the Ethereum mainnet during the same time period, thus Loopring’s transaction count was equivalent to 3.25% of that figure.
Second-layer solutions allow executing certain operations outside of the main blockchain—or “off-chain”—which, in turn, helps reduce the load on the main network. As an added bonus, layer two solutions offer faster transaction speeds and lower fees.
Loopring, in particular, is a zkRollup exchange and payment protocol. It’s an orderbook-based decentralized protocol on Ethereum that allows users to transfer their assets across various exchanges.
To achieve this, Loopring pools orders from numerous crypto exchanges and then matches them with orderbooks of all platforms that participate in the network. This way,accordingto its developers, Loopring cuts transaction costs to just 0.1% of those on the Ethereum mainnet.
If you need to send lots of payments on Ethereum, you need to send it on Loopring zkRollup.
Same security. Same addresses. Same tokens. >100x cheaper. 🏎️ https://t.co/JVuDz9iPG5
— Loopring (@loopringorg) February 4, 2021
AsDecryptreported, the average Ethereum transaction feeexceeded $23 on February 5, reaching a new all-time. In this light, transactions and decentralized applications on Ethereum are becoming increasingly more expensive.
As a result, trading on decentralized exchanges, such as Uniswap, has become increasingly expensive in the last few weeks. Executing trades can cost $50 or more.
Cost of usage increases with gas fees, which aren’t directly tied to ETH price, but rather to demand for layer 1 blockchain space. The two are certainly correlated. This has long been a focus in crypto – ethereum (and all layer 1s) need to move most transactions off of layer 1.
— Ari Paul ⛓️ (@AriDavidPaul) February 8, 2021
“Cost of usage increases with gas fees, which aren’t directly tied to ETH price, but rather to demand for layer 1 blockchain space. The two are certainly correlated. This has long been a focus in crypto – ethereum (and all layer 1s) need to move most transactions off of layer 1,” recently wrote Ari Paul, co-founder and chief investment officer of BlockTower Capital.
Considering Loopring’s latest achievement, it looks like many users agree with him.
The U.S. dollar lost about 7% of its value in 2020, while Bitcoin rallied about 300% during the same period. As Bitcoin’s institutional adoption increases, United States companies may start to diversify their treasury with other stores of value, and Bitcoin (BTC) stands a good chance to garner a portion of it.
Crypto market data daily view. Source:Coin360
Ark Invest’s latest report, “Bitcoin: Preparing for Institutions,” shows that even a paltry allocation of 1% by companies from the S&P 500 could boost Bitcoin’s price by $40,000. However, analysts at Ar believe that the allocation is likely to be in the range of 2.5% to 6.5%, which “could impact bitcoin’s price by $200,000 to $500,000.”
Even as Bitcoin’s price consolidates and readies for the next leg up, several altcoins have been rising, backed by strong fundamentals and investors’ high expectations of their upcoming products. Let’s look at three such tokens today.
BAND/USD
The decentralized finance space has boomed in the past few months, and the success of the protocols rely heavily upon data sources that are decentralized, fast and reliable. This is where Band Protocol steps in. The cross-chain data oracle has announced several partnerships in the past few days, which shows it is gradually building its market share.
The strong rally in stocks such as GameStop, AMC and others have captured traders’ attention in the past few days. Band’s tie-up with Injective Protocol to deliver decentralized price oracles for various stocks to be supported on the decentralized derivatives platform could benefit the price of its native token, BAND, as a successful integration would be followed by an increase in demand.
Similarly, Linear Finance, a derivatives asset protocol, will also use Band’s real-time price feeds to offer its clients a seamless trading experience for several synthetic assets.
Band is not limited to only providing price feeds of cryptocurrencies, foreign exchange assets and commodities. Elrond and Band have expanded their partnership further to bridge the two networks to provide off-chain data to various applications being developed on the Elrond network. Other than the usual price feeds, Band will also cater to data requests for sports, gaming, esports and much more.
Along with these, Band has also entered into partnerships with the Moonbeam protocol, Nervos and Fantom in the past few days and broadened its existing partnership with CoinGecko.
BAND price rose from $7.1532 on Jan. 22 to $12.949 on Tuesday, an 81% rally within a short time. Previous to this move, the price had largely been stuck in the range of $7 to $11.50 for the past few days.
BAND/USDT daily chart. Source:TradingView
The bulls pushed the price above the range on Tuesday, but the long wick on the day’s candlestick shows the bears are aggressively selling at higher levels. This has dragged the price back into the aforementioned trading range.
If the bulls do not give up much ground, then one more attempt to break above the range is likely. The 20-day exponential moving average ($9.28) has started to turn up, and the relative strength index (RSI) is in the positive territory, which suggests that the path of least resistance is to the upside.
If the bulls can drive and sustain the price above $11.50, the BAND/USD pair could rally to $16 and then to $17.78. This zone may act as stiff resistance, but if the bulls can propel the price above it, the momentum could further pick up.
Contrary to this assumption, if the bears successfully defend the $11.50–$12.949 resistance zone, the pair may extend its stay inside the range for a few more days.
LRC/USD
The GameStop saga and the trading limits imposed on retail traders by brokerages like Robinhood have exposed their significant flaws. This is likely to draw traders to decentralized exchanges where control does not lie with any central entity.
Transaction fees are an extremely important aspect during trading, especially for smaller-sized traders. So, when Ethereum gas fees increase, these retail traders are the most affected. Loopring attempts to solve this problem with it layer-two scaling.
Data from Dune Analytics shows that Loopring’s fee collection recently surged to its highest-ever level due to increasing volume. The protocol recently updated its LRC tokenomics model and announced a new fee distribution pattern to its various participants. This could further attract LRC investors who may want to benefit from the rising popularity of the protocol.
LRC rose from an intraday low at $0.33651 on Jan. 22 to an intraday high at $0.57618 on Jan. 31, a 71% rally within a few days. The upsloping moving averages and the RSI in the positive territory suggest that bulls are in control.
LRC/USDT daily chart. Source:TradingView
The up-move is currently facing resistance near $0.55, and the LRC/USD pair could drop to the 20-day EMA ($0.43). This is an important level to watch out for because the pair has taken support at the 20-day EMA on three previous occasions.
If the pair again rebounds off the 20-day EMA, the bulls will make one more attempt to resume the uptrend by pushing the price above $0.62167. If they succeed, the pair could rally to $0.71773 and then to $0.78.
This bullish view will invalidate if the bears sink and sustain the price below the 20-day EMA. Such a move will suggest that the bulls are not buying the dips anymore, and that could result in a fall to $0.35 and then to the 50-day simple moving average ($0.31).
CREAM/USD
Certain aspects of traditional finance could act as an inspiration to build projects in the decentralized space. Cream Finance recently announced the launch of Iron Bank, which is guided by the success of the $10-trillion U.S. corporate debt market.
While there are several peer-to-peer lending protocols existing in the crypto space, Cream has taken it a step further and created a protocol-to-protocol lending mechanism. The main attraction of the Iron Bank is that it will facilitate zero-collateral lending.
To keep the risk under check, Cream will set a credit limit after whitelisting the protocols. Initially, the Iron Bank is available only for Cream’s partners, but if this project succeeds, it is likely to be a huge positive for the entire DeFi space.
In other news, Cream recently widened its services by adding SushiSwap and Uniswap LP tokens as collateral options for lending and borrowing.
The platform’s CREAM token rallied from $119.35 on Jan. 22 to an intraday high at $319.9 on Tuesday, a 168% rally within a short time. The long wick on the day’s candlestick shows that traders aggressively booked profits at higher levels.
The number of decentralized exchanges running layer-two solutions is growing as the Ethereum network struggles to keep up with its own popularity.
As excessive Ethereum gas prices continue to hamper smaller transactions and operations on the network, the number of faster and cheaper options continues to expand as layer-two adoption increases. Layer-two solutions have the potential to process thousands of transactions per second, rather than the handful processed on layer-one.
The LeverJ decentralized exchange has seen a surge in trading volumes since it launched perpetual contracts four weeks ago. Around $75 million has been traded across 26,600 transactions, costing just under $600 in total gas fees. Industry observer ‘DeFi Dad’ commented;
“Only in DeFi 2021 could you miss these monster numbers trading on an Ethereum DEX—built on L2“
Although these figures may seem small compared to DeFi giants such as Uniswap, they represent a surge in layer-two adoption at a time when the technology is most needed. Essentially, layer-two scaling involves taking work off the root chain in order to process data and transactions faster and more cost effectively.
DeFi protocol Synthetix is also poised to launch its Optimism layer-two staking upgrade called Castor later today, Jan. 14, at 23:00 UTC.
Unfortunately we’ve had to delay the Castor release by ~22 hours, and it will now be deployed at 23:00 UTC on Thursday, January 14. https://t.co/nlbgvZ99pI
— Synthetix ⚔️ (@synthetix_io) January 13, 2021
Castor is the result of four months of testing which began in late September by offering incentives in its native SNX token to participants of the testnet.
The DeFi protocol, which offers synthetic assets tracking the value of real-world assets, is migrating to a new SNX escrow contract that supports L2. The upgrade also includes two smart contracts enabling deposits on layer-one and withdrawals on layer-two using optimistic rollups.
The developers expect that putting staking on layer-two will improve the user experience with faster transaction processing and cheaper gas costs. With its complicated smart contracts, minting, staking and claiming weekly rewards has sometimes cost more than $100 per transaction, which will now be a thing of the past.
According to the Synthetix dashboard, market capitalization has reached $3.2 billion while SNX prices have surged 26% over the past seven days to reach an all-time high of $16.
Decentralized exchange Loopring is also gaining traction with new updates and layer-two liquidity mining incentives for its native token, LRC.
Its latest feature is the ability to send from a Loopring L2 account to any Ethereum based L1 account without the recipient ever needing to be on L2.
“This means you can send a fast, cheap (gas-free) payment on L2 to your friend that has never even heard of L2, all you need is their Ethereum address (or ENS name),”
The number of layer-two based networks and exchanges are increasing but the big question remains when will the most popular DEX, Uniswap, launch its L2 upgrade?
Average Ethereum transaction prices have retreated a little from their record high of more than $16 on January 11, but they are still economically unviable for many users at over $5 according to bitinfocharts.com.
