20 October 2020
Analysts and market investors expect a lot from the Ethereum price. The network has been subject to speculation, for good reason. The underpinning platform, Ethereum, is undoubtedly the most active smart contracting platform. Over the last few months, it remains as the home for decentralized finance, or better, DeFi. Decentralized finance is nothing more than “money legos,” a successful attempt by developers and ambitious investors to port over the financial system and processes from the traditional setup to the blockchain without the middleman.
And this is exactly what the community needs. The world is shifting away from the age of unnecessary impediments, obstacles by middlemen, to a world of more efficiency and control.
Back in July, the chair of the United States Commodity Futures Trading Commission (CFTC), Heath Tarbert, said he was fascinated by the DeFi mentioning the special attributes of the blockchain of decentralization and the absence of borders.
He said what the world is seeing now in DeFi was comparable to “Renaissance in Italy” and that people are building an economic system in less than a decade based on human incentives and trust was simply fascinating.
Last week, Heath reiterated his position in DeFi saying it was revolutionary and it would lead to “a massive disintermediation of the financial system and the traditional players.” Notably, he said DeFi helps support the economy through decentralization away from “large and systemically important financial institutions.”
That the Ethereum platform is due for a revamp is vital for applications, DeFi, and non-DeFi, running on the blockchain. Specifically, the upcoming upgrade does away with the concept of mining, neutralizing the powers of miners.
In September–at the height of the DeFi when the network saw a demand spike, Gas fees rose to untenable levels. It is during this month that Ethereum miners made $172 million as revenue from transaction fees.
Although transaction fees, measured in Gas, have since fallen, how a class or a dApp is adopted will influence transaction fees. Consequential, Gas directly affects user experience and this has an effect on adoption.
Earlier, Vitalik Buterin, the co-founder of Ethereum, said intermediate measures could be taken to relieve the base layer from the choking higher fees. Buterin proposed that heavy users adopt Layer-2 solutions, specifically “rollups.”
The off-chain solution transfers transactions away from the main chain to an off-chain channel for processing and confirmation, “rolls them up” before being confirmed in the Ethereum main chain. In his assessment, Vitalik is of the view that this will be a practical solution before the Eth2 activates scaling in late 2021.
Before then, it makes sense for the Ethereum development team to devise a means of fully exploiting means of scaling the base layer. He, therefore, urged “heavy” dApps to move to Rollups. Some of them including a decentralized derivatives exchange, Synthetix, are trialing the network. Others like Uniswap plan to use Rollups once they upgrade their systems.
Still, the transition to Ethereum 2.0 (often referred as “Eth2”) and Proof-of-Stake (PoS) is a huge change, a relieving move for network users who may even enjoy lower transaction fees as the auctioning system used in the Proof-of-Work system will be replaced by Validators who only require 32 ETH to be part of the fold.
At this stage, the Ethereum network would be better decentralized than it is as the network security is anchored on the value of the ETH price.
With the Zinken test network ironing out onboarding troubles and other client-related problems, the development team is readying for the Beacon Chain.
Ahead of the Genesis Date, that is, the launch date, the community will be notified of the deposit contract date when the staking of real ETH will begin. By staking, it sets the ground for transaction validation date that is Genesis, on the mainnet, and the official launch of the Beacon chain mainnet, Phase 0.
However, here is a big problem.
Those who deposit their ETH, willing to be Validators won’t access their coins till Phase 1.5–that is when the Proof-of-Work consensus algorithm machine will be switched off, sometimes in 2021 for a paltry 15 percent return.
Therefore, from the look of things, and judging how everything will pan out, it might take longer than expected for the threshold of 512,000 ETH to be hit before the Eth2 machine is primed.
From the daily chart, the Ethereum price continues to edge higher. At the time of press, prices are steady but building on yesterday’s gain.
Following the bullish breakout pattern above the bull flag in early October, the immediate resistance level is $400.
A close above this with high participation level could see ETH Prices rally to $480 or better by the end of the year.