ETH (ethereum) is the second most dominant cryptocurrency next to BTC (bitcoin). It is also dubbed the king of altcoins” which now holds a market cap of $287,051,336,931 in data by Crypto.co. The ethereum blockchain is also the most preferred network among developers and investors. With the stoppable growth of decentralized finance (DeFi) projects, the network has grown immensely. Currently, there are 203 DeFi projects in the network from a total of 225 DeFi projects in the crypto space. In recent data by DeFi Llama, the network currently has a total value locked (TVL) of $95.1 billion which accounts for more than 50% of the $160.34 billion TVL of the entire DeFi space.
Even in staking, ETH (ethereum) is also in the second spot next to SOL (Solana). After momentarily being surpassed by LUNA (Terra), a native token of the Terra network, ETH (ethereum) has reclaimed its previous spot. And as the completion of the 2.0 is fast approaching, crypto whales are now on the move to accumulate more of the altcoin. This is in preparation for the looming network upgrade where ETH (ethereum) price is expected to surge.
The ethereum network has been struggling with issues of scalability, interoperability, and surging gas fees. These loopholes are now being used by its leading competitors like Solana, Terra, Polkadot, Cardano, and Oasis to attract users and developers from its fold. But despite this, the Ethereum blockchain remains the “most favorite network” given its dominance not just in the DeFi space but also when it comes to NFT projects. Most leading NFT projects like Bored Ape Yacht Club (BAYC), Axie Infinity, and CryptoPunks were built on the ethereum network.
But why is the ETH 2.0 the most anticipated event for the blockchain network? The upcoming upgrade is expected to change the fee structure with users having to pay lower gas fees and resolve the issue of scalability. It will also provide opportunities for more ETH (ethereum) holders to stake their tokens and become validators. Currently, the Ethereum network only has 30 TPS which is a far cry from Bitgert BRC20 blockchain’s 100,000 TPS, one of the newest players in the crypto space. Solana one of the leading “eth killers” has a TPS of 65,000 while Cardano, another ethereum competitor has 250 TPS. But with once the 2.0 goes live, Ethereum promises up to 100,000 TPS which will be achieved through the help of shard chains. Hence, the excitement among holders of the altcoin and the reason behind the increased number of its holders.
The high demand for Ethereum since its launching in 2015 has made the Ethereum community clamor for an upgrade that they believe could solve the problems plaguing the network and unlock its full potential. The network is utilizing proof-of-work or mining as its consensus mechanism similar to Bitcoin. Mining has been highly criticized by environmental experts worldwide allegedly for its voracious consumption of energy and hazardous environmental impact. China formerly known as the world’s biggest mining hub has driven bitcoin miners to leave the country after implementing an intensive crackdown on mining. But with the upgrade being implemented in phases, it is slowly shifting to proof-of-stake which is more energy-efficient and environmentally friendly.
Phase 0 or “Beacon Chain” was launched on December 1, 2020. “The Merge” or Phase 1 will be released in Q2/Q3 of 2022. In this phase, the Ethereum Mainnet will “merge with the beacon chain proof-of-stake system.” Under this stage, the proof-of-work will finally end and the network will undergo a full transition to proof-of-stake. When this happens, all miners should all shift to staking to continue receiving rewards in validating transactions for block rewards and transaction fees. Phase 1.5 will follow which will enable cross-shard interoperability and allow native decentralized application (dApp) development on the network. And finally the implementation of Phase 2 which will involve sharding,” a multi-phase upgrade to “improve Ethereum’s scalability and capacity.
The upgrade to 2.0 as a concrete solution to the problems in the network remains to be seen. While it is expected to launch later in 2023 but until then users of the blockchain will have to bear with the prevailing issues on the network. With the delay, leading “eth killers” will still have a chance to outperform the network until then as stressed by a JP Morgan analyst in 2021.
“The risk for Ethereum is that by the time sharding is implemented in 2023, competitors’ ecosystems would have grown by so much that activity won’t return en masse to the Ethereum network. In other words, Ethereum is currently in an intense race to maintain its dominance in the application space with the outcome of that race far from given, in our opinion.”
Solana network is now up to the challenge of unseating Ethereum as the favorite blockchain for NFT creators with its relatively low fees. And with new players entering the crypto space undeniably pose a threat to Ethereum’s dominance. Will it continue to dominate until the completion of its upgrade?