The switch to Ethereum 2.0 could trigger a record rise in ETH. Ethereum is supposed to be in the cryptocurrency markets within a few months, and some analysts predict that this could be the beginning of a new era for Ethereum; the redesign of ETH 2.0 will transform DeFi and trigger a huge price hike.
For some time, Ethereum developers have been focusing on developing a new version of the network, including the use of Sharding and the Proof-of-Stake (PoS) mechanism.
Ethereum Vs Ethereum 2.0
Ethereum 2.0 was mainly designed to improve the scalability of the Ethereum network. All updates and technical improvements of Ethereum 2.0 should be introduced this year. These updates will notably mark the transition from Proof of Work to Proof of Stake, which according to Vitalik is more secure, as it makes attacks against the network more expensive. But let's remember the first version first.
For beginners, Ethereum is an open software platform based on Blockchain technology, which allows developers to create and deploy decentralized applications.
On the current Ethereum network, new Ether coins issued and received by miners creating a new block follow a Proof of Work (PoW) protocol. To participate in the mining process, members must make their computing power available to solve complex mathematical problems. These rewards help them finance their operating costs and can also be turned into profit.
Ethereum's main innovation, the Ethereum Virtual Machine (EVM), is a complete Turing software running on the Ethereum network. It allows anyone to run any program, regardless of the language used, with sufficient time and memory. The Ethereum Virtual Machine makes the process of creating Blockchain applications much simpler and more efficient than before.
Other major advances in Ethereum 2.0 include Sharding, which is mainly aimed at:
- Divide the network into subnetworks, each responsible for validating its own transactions;
- Facilitate the deployment of future large-scale updates
'This approach ensures that there will not be a need for a new upgrade as great as the one from eth1 to eth2; on the contrary, from eth2 onwards, things will be much more progressive.»Vitalik Buterin
An outing planned this year
Crypto enthusiasts are all excited about Bitcoin's next halving, which however is not the only deadline that drives the world of cryptocurrency in the year 2020. Ethereum version 2.0 is also in the spotlight. And this update could prove to be at least as rich in consequence on the world of cryptoworld as the expected movements of the BTC. Because Ethereum is the blockchain on which almost everything rests. From Decentralized Finance to the ERC20 and NFT tokens, via the famous Tether (USDT), it is the foundation on which many projects are built. Hence its well-deserved title of Money Lego.
On 06February on Reddit, during an Ask Me Anything session organized by the Ethereum foundation, an internet user asked for more information about the new calendar for Ethereum 2.0. This internet user wrote:
If I understand correctly, we're talking about July 2020 right now. If Phase 0 doesn't start in 2020, would you consider it a failure?'
Justin Drake, a developer close to Vitalik Buterin, the co-creator of Ethereum, replied that:
Eth 2.0 would go into production when the user interface for the depots and network customers would be operational.2020. I hope we can launch by July 30, 2020 (the 5th anniversary of Ethereum 1.0). It is unlikely that we will launch in the first or second quarter of 2020. Yes it would be a failure but I am 95% confident that we will launch in 2020 :), »
The Bull Run’s reasons
Let's go back to the analysts' predictions. Why would the arrival of Ethereum 2.0 be a source of Bull Run for the first version? And who are those analysts?
The analyses are made by Adam Cochran, partner at MetaCartel Ventures DAO and strategy developer at DuckDuckGo. He delivers the analysis in a full article, which summarizes a long Thread published on Twitter. He supports several arguments as to why ETH 2.0 'could prove to be the greatest economic change in society'. Adam Cochran is indeed to say in this article that the picketing could cause an ether supply shock. One of Cochran's reasons is that the 3-5% rewards offered by ETH's pledge to allow the development of its Proof of Stake (PoS) solution should attract large investors, until about 30% of the total supply is blocked. The next ETH burn mechanism will contribute to the reduction of supply on the markets.
This will trigger a mass influx of more cautious investors, surfing on a FOMO effect, fuelled by a scarcity of supply. An event which, according to Cochran, should be strongly amplified by the current number of 'verified and ready to use' buyers sleeping on the trading platforms. Coinbase alone already has more than 30 million of them. Adam Cochran said:
'Simply put, the more real demand there is to use the system, the higher the price goes, because there is real underlying value created for the user. »
Another reason invoked by Adam Cochran concerns the burn of part of the transaction costs (basefee), included in the protocol of Ethereum 2.0. A kind of cherry on an already appetizing cake. This still represents the disappearance of 10,000 ETH/year according to the author. A figure that will increase with use, but which for the moment is only 0.01% of the total annual supply. However, if Ethereum becomes this central player in a booming universe, this amount in burnt ETH could eventually exceed the number issued, creating a decrease in supply in the long term.
Alex Batlin, also spoke to cointelegraph and stated that the impact of ETH 2.0 will extend far beyond price fluctuations. Batlin, the founder and CEO of the Trustology cryptocurrency storage platform, believes ETH 2.0 will provide the scalability needed to support the widespread adoption of decentralized financial protocols. He explained:
'For DeFi to really work, we need to go from twenty to a thousand or even two thousand transactions per minute, and then we'll start to get really serious. And ETH 2.0 is getting there. If you look at the specs, it's pretty exciting'. If ETH 2.0 continues on its current trajectory, Batlin believes that DeFi could expand to eventually become 'the predominant mechanism by which we finance.