consensus mechanism

Ethereum Will Be Deflationary and Running on Proof-of-Stake by Year-End, says Market Analyst

Ethereum (ETH) is eyeing $3,000 as the second-largest cryptocurrency by market capitalization is trading at $2,714 at the time of writing, according to CoinMarketCap.

Lark Davis believes that Ethereum will have cemented its status as a deflationary currency because its value will continue increasing with time. The market analyst explained:

“By the end of the year, Ethereum will be deflationary and running on proof of stake. A Fundamental economic shift is coming for ETH.”

Davis added that a paradigm financial shift is on the horizon for Ethereum. For instance, he recently pointed out that ETH attained its highest daily close after breaching the $2.500 price.

Ethereum is also a stone’s throw away from surpassing Paypal’s market capitalization of $318.33 billion, as its current market cap sits at $314.47 billion.

TVL of ETH 2.0 breaches $10 billion

According to crypto insight provider Bloqport, the total value in ETH 2.0 deposit contract surged past $10 billion with 3,994,722 ETH deposited.

Ethereum 2.0 went live in December 2020, and it seeks to change the current proof-of-work consensus mechanism to a proof-of-stake framework, which is touted to be more environmentally friendly and cost-effective.

The proof-of-stake algorithm allows for the confirmation of blocks to be more energy-efficient and requires validators to stake Ether instead of solving a cryptographic puzzle. Additionally, Ethereum’s transition to a proof-of-stake model will allow the blockchain to see enhanced upgrades, including sharding, which would improve scalability.

Davis, therefore, believes that the proof-of-stake consensus mechanism will be running by the end of the year.

Ethereum on-chain transactions go through the roof

IntoTheBlock has acknowledged that large investors are behind ETH’s rally, making on-chain transactions go through the roof. The data analytic firm noted:

“Yesterday’s ETH rally was driven by large investors. The volume transacted in on-chain transactions greater than $100k reached its highest value ever. The volume of these large transactions reached $20.95b yesterday, and more impressively, it was 91% of the total on-chain volume.”

Moreover, ETH settled transactions worth $1.5 trillion in the first quarter of 2021 compared to $1.3 trillion in 2020.

Staked Ethereum Surpasses Mined ETH

Ethereum locked in the ETH 2.0 deposit contract continues to outway the one being mined daily, which is a bullish sign, according to market analyst Lark Davis.

He explained:

“Ethereum 2.0 has 195,878 validators running the network with a total of 6.268 million ETH deposited. Currently, we are seeing more Ethereum a day flowing into ETH 2.0 to stake than is being mined. BULLISH!”

Ethereum 2.0 (ETH 2.0), also known as the Beacon Chain, was launched in December 2020 and was regarded as a game-changer that seeks to transit the current proof-of-work (POW) consensus mechanism to a proof-of-stake (POS) framework. POS is touted to be more environmentally friendly and cost-effective.

The proof-of-stake algorithm allows the confirmation of blocks to be more energy-efficient and requires validators to stake Ether instead of solving a cryptographic puzzle. Additionally, Ethereum’s transition to proof-of-stake will allow the blockchain to see upgrades, including sharding, which would improve scalability. According to JP Morgan analysts, a shift to the POS consensus mechanism could fire up the $40 billion staking industry.

Ethereum’s utility is expected to rise

According to Santiment, the continuous drop in Ethereum’s average fees could increase its utility levels. The on-chain metrics provider stated:

“Ethereum’s average fees are down to $2.19, which is the lowest the second market cap asset has been since December 2020. This is a promising sign that ETH’s utility can rise with little impact of fees standing in the way of healthy circulation.”

Furthermore, the number of ETH addresses holding for more than a year continues to increase.

As the number of Ethereum holders continues to increase, whether this will push ETH higher to reclaim lost grounds based on the recent crypto market crash remains to be seen.

Ethereum’s Social Volume Climbs to an 11-Week High

Ethereum (ETH) continues getting a keen eye as crowd awareness, and interest rose substantially after the second-largest cryptocurrency crossed above $2,500, as acknowledged by crypto analytic firm Santiment.

The recent price surge in the crypto market made ETH’s price surge past $2,600 following months of consolidation, given that low volatility had become the norm. Ethereum was hovering around $2,500 during intraday trading, according to CoinMarketCap.

On the other hand, ETH 2.0 continues gaining steam because the number of accounts recently topped 4,000. Moreover, the number of Ethereum 2.0 validators recently surpassed 200,000.

This deposit contract went live in December 2020 and sought to transit the current proof-of-work (POW) framework to the proof-of-stake (POS) consensus mechanism.

Therefore, the increased bet on the future of the Ethereum blockchain comes as the next major upgrade in the network, the London hard fork is set to go live on August 5.

The surging deposit rate, which typically reduces the supply of Ethereum on spot exchanges, is also set to complement the unique features billed to be introduced by the London hard fork.

Ethereum looks good on-chain

According to Lex Moskovski, the CIO at Moskovski Capital:

“Ethereum looks good on-chain, indeed. 1. Supply on exchanges has been drained 2. Supply in smart contracts is ever-increasing 3. Short-term holders stopped getting rekt 4. Supply staked in ETH 2.0 validators is increasing.”

These factors could trigger a supply squeeze, which is a bullish sign.

Is the $3,000 level next?

According to IntoTheBlock’s IOMAP indicator, Ethereum faces two key levels of on-chain resistance on its path to $3,000 once again.

This is because 1.19 million addresses bought 2.03 million ETH between the $2,598 and $2,753 levels.

Time will tell how Ethereum shapes up moving forward, given that its perpetual swaps open interest recently hit a two-month high.

10% of Ethereum Supply Staked in ETH 2.0 in Anticipation of The Merge

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.