Following the release of Ethereum 2.0, operators are betting on staking.
In this week’s cryptocurrency trading, traders are focusing on the development of the crypto ecosystem, in particular Ethereum’s impending proof-of-stakes merger and the positive implications for its native currency, ETH.
Alex Kruger, a trader and analyst, said in a Telegram chat that he was “very bullish” on ETH for the summer.
Users can already hold cash in their cryptocurrency wallets to support network operations in exchange for newly produced coins, according to Ethereum developers who have just tested the long-awaited ETH 2.0 version of the protocol. Consequently, staking is analogous to passive investing.
Kruger believes that ETH staking returns will range between 10 and 15 percent. According to blockchain analytics firm IntoTheBlock, the US consumer price index hit a four-decade high in February, rising 7.9 percent.
“The commissions that the miners used to charge will now be charged by the people who stake.” According to IntoTheBlock’s weekly message, “staking payouts are expected to range from 7 to 13 percent.”
Investors prefer those assets or investment methods that provide positive real returns. If inflation is taken into account, traditional investments are currently giving negative returns. In the current market, the popular bitcoin cash and carry transaction yields -4.9 percent real, while holding ETH in the Lido liquid stake system yields -3.9 percent real.
Institutions look for ETH 2.0
If the merge test goes smoothly, the researchers expect the mainnet to be operational by the end of June. Observers anticipate an increase in institutional adoption with the upgrade to ETH 2.0.
“Right now I’m in a good mood. Estimated returns after the merger range between 10% and 15%, depending on the sector. As noted by Ilan Solot, a partner at Tagus Capital Multi-Strategy Fund, in a Telegram chat, “migrating to proof-of-stake makes sense as institutions don’t have to make the energy use argument associated with bitcoin and cryptocurrencies. proof-of-work coins.”
Compared to proof-of-work, proof-of-stake is more environmentally friendly as it does not pay miners to solve difficult mathematical difficulties in order to confirm transactions. It takes a lot of effort to do it. According to various assessments, bitcoin mining has a carbon footprint equivalent to that of industrialized countries, which inhibits institutional adoption of the cryptocurrency. In 2017, Tesla, the American manufacturer of electric vehicles, ceased bitcoin payments due to problems with the mining process.
The Beacon Chain deposit contract, announced in December 2020, incorporated the scam but did not alter the principles of Ethereum. It will change the consensus when it joins the mainnet in 2022, reducing energy consumption by 99.95% and eradicating a carbon footprint the size of Finland,” Ruben Merre, CEO of cryptocurrency portfolio NGRAVE, said in a statement. a LinkedIn post.
At the beginning of this month, the deposit contract had more than 10 million ETH.
Stock storage and scalability
Lastly, the merger is very likely to make ETH a deflationary asset, similar to bitcoin, in the future. Following the merger, according to the website IntoTheBlock, the amount of Ethereum distributed is likely to drop by 90%, leading to a reduction in the supply of up to 5% each year.
The expansion of the ETH supply has already stopped. In the EIP-1559 of August, a method was envisaged to burn a part of the miners’ fees. According to Watch the Burn, nearly 2 million ETH worth more than $5.78 billion have been destroyed since then, leading to a 65.2 percent net supply reduction in the cryptocurrency market.
An improvement in fragmentation after the merger, according to industry experts, will be a more beneficial driver. Sharding is a method of distributing the load on the Ethereum network by dividing it into chunks. The enhancement will help minimize network congestion while speeding up transaction processing.
“After the merger, sharding makes it easier to expand,” said Laurent Kssis, a director at CEC Capital and a specialist in cryptocurrency ETFs. Whether or not Ethereum’s dominant position as the Web 3 blockchain is justified and sustainable remains to be seen. While it may not be resolved immediately due to rising interest rates and therefore gas rates, it will be fascinating to see the first-mover advantage and ability to attract developers.
The importance of transaction speed and energy efficiency for Kssis is underlined, as well as the possibility of reducing commissions in the future.
According to CoinDesk, Ethereum gained 13% last week, the biggest weekly gain in seven weeks. On March 15, approximately 180,000 ETH was withdrawn from regulated exchanges, indicating a decline in the amount of ETH available on the market.
According to IntoTheBlock on Telegram, “a substantial amount of ETH left exchanges in October 2021, before a 15 percent price increase in 10 days.”
Earlier today, it was the last trading at $2,900, up 1% from the previous day’s close.
