El camino de Ethereum hacia los USD 2.000: tres razones para ser optimista

Ethereum, the second largest market cap cryptocurrency, hit a new all-time high of $ 1,439.33 on January 25. It’s the first time this digital asset has broken the $ 1,400 cap since January 13, 2018, and its returns add up 76% so far this year, 19 times higher than Bitcoin’s in 2021. Despite a temporary correction It remains one of the top performing assets in the top 10.

While there were no obvious factors that could be considered fundamental to taking the rally to a new all-time high, Ether has been on the verge of breaking its record price for more than two weeks after rising to $ 1,350 in January 10. The exponential growth of the decentralized financial market, known as DeFi in English, whose logs to date contain around $ 24 billion worth of crypto assets, was likely a factor that contributed to the upward trend in activity. Now, as Ethereum approaches uncharted territory, all eyes will be on the second most important cryptocurrency in the market as it hits its next major milestone: the psychological mark of $ 2,000. This iconic line is more than 50% off current price (at the time of going to press), but three major events are planned for 2021 that could help make it happen.

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1. CME Ethereum Futures

The world’s largest financial derivatives platform, the Chicago Mercantile Exchange (CME), publicly announced on December 16 that it plans to launch Ethereum futures by February 8 if it succeeds in gaining regulatory approval from the U.S. American Commodity Futures Trading Commission (CFTC). Financial derivatives are essentially trading contracts that allow investors to bet on the future price of an underlying asset without having to own it.

This new cash-settled financial product – that is, every profit made is paid out in US dollars instead of Ether – comes three years after the launch of Bitcoin futures, which is currently the product of Bitcoin futures, the most widely traded in the world and represent more than 20% of all open contracts.

Ultimately, the arrival of Ethereum futures will bring greater maturity to the cryptocurrency market and, although futures are not physically distributed, greater liquidity. This is beneficial as it gives institutional investors in particular the opportunity to hedge spot positions, which reduces the overall risk and makes Ethereum a much more attractive investment.

2. Ether Withdrawal and Foreseeable Fees

Any action performed in decentralized applications (dapps) or protocols based on Ethereum is designed as a transaction that requires an additional fee to motivate miners to process. Currently, these values ​​are determined through an auction system where the users who assign the highest fees to their transactions are the ones who get the miners to process them faster. This dynamic has a number of drawbacks, namely: unpredictable and often excessive rates in times of greatest congestion. In the network this agglomeration is created every time there is a peak of business activity, e.g. B. when the price of Ethereum changes abruptly and thousands of operators want to enter or leave the market at the same time.

EIP 1559 is an Ethereum improvement proposal submitted by project co-founder Vitalik Buterin along with developers Eric Corner, Ian Norden, Rick Dudley and Matthew Slipper. The aim is to implement changes in the way fees for Ether transactions are presented to users, as well as in the administration of the Ethereum offering. EIP 1559 proposes removing the current auction price system and replacing it with an algorithmic system called BASEFEE. This is to introduce a uniform rate on all platforms and services that work on Ethereum, which increases and decreases depending on the activity of the network. Such a change would mean that there would no longer be fee differences between wallets, protocols and exchange platforms (exchanges) that are compatible with the ERC-20 token.

However, EIP does offer users the option to tip miners if they want their transactions to be processed faster. The second feature of EIP 1559 that is likely to have the greatest impact on the future price of Ethereum is the introduction of the option to burn (incinerate) ether. Withdrawal (NdT: or “burn”, when the literal translation of the term is used in English, burn) means to completely eliminate the presence of tokens, which leads to a reduction in the supply in circulation. EIP 1559 plans to withdraw the BASEFEE so that the vast majority of the ethers used as payment for fees resulting from transaction processing will be destroyed instead of being passed on to network validators.

The aim is to encourage the constant deflation of the ether, which in turn should help boost prices over time. The EIP is expected to go into operation sometime after the Berliner Gabel, which could occur from February.

3. Start of phase 1 of Ethereum 2.0

Ethereum is in the process of transitioning from a proof-of-work-based blockchain to a blockchain that operates under a consensus mechanism called proof-of-stake to become a faster, more efficient, and more scalable platform. The Ethereum 2.0 update consists of four different phases – phase 0, phase 1, phase 1.5 and phase 2 – each of which forms the technical basis for the next phase until the last phase is completed. Phase 0 was started on December 1, 2020 and with it the implementation of the Beacon Chain, a new blockchain layer that coordinates the activity between Ethereum shard chains (NdT: Sharding is a proposed method to divide the Ethereum infrastructure into smaller parts to subdivide) to scale the platform to support more users).

Phase 1 is the next in the development of Ethereum and will include the launch of 64 shard chains. All transaction activities in the network are ultimately split up and processed on these separate blockchains. With this new system, the exchange does not have to be validated by the entire network, but only by a shard chain, which significantly reduces time and enables significantly higher volumes to be handled without creating the level of congestion currently occurring on the network.

Although there is no confirmed date for the start of phase 1, it is expected to arrive later this year.

Translated by Andrés Engler.