Summary of Ethereum’s major events

Original title: "The Grand Narrative of ETH 2.0 | BlockArk's Viewpoint"

Original source: Block Ark Pro

The significance of grand narratives

The famous psychologist Maslow summarized a hierarchy of human needs. Human needs are hierarchical, from physiological needs, to safety needs, to social needs, to respect needs, to self-realization.

Everyone has the potential impulse to transcend themselves and achieve self-realization. It can be said that the ultimate goal of life is to pursue self-realization. All physiological needs, safety needs, social needs, and respect needs are preparations for the highest goal of self-realization.

But it is very difficult to achieve self-realization. Most people in this world are destined to be mediocre or ordinary people, and there is no possibility of self-realization. Therefore, grand narratives are necessary. Investing in grand narratives can satisfy people's needs for self-realization.

The same is true for the grand narrative of the capital market. Nothing is more comforting than the emergence of an inspiring grand narrative in a painful and tedious investment career. You can gain the satisfaction of wealth and investment achievement just by immersing yourself in the story with others.

In the traditional capital market, Jia Yueting of A-shares and Musk of US stocks are two typical examples of grand narratives. They both gave great stimulation to stockholders and currency prices in certain periods of time. The difference is that one has no ability to realize it, and the other has the ability to realize it. Musk is a man who changed the electric car industry, set up a private company to launch a rocket, and started the Mars immigration plan. With this kind of style, compared with Xiaopeng Motors and Weilai, Tesla's temperament suddenly became sexy and charming, and of course the stock price is even sexier.

Well-known projects in the blockchain field still follow such rules.

BTC - Digital Gold

LTC - Digital Silver

FIL - A new generation of interstellar storage network

DOT/ATOM——web3.0/cross-chain duo

EOS — Blockchain 3.0

EOS, a strong competitor of ETH, was designated by Vitalik as the "real ETH 2.0". Although it seems a bit ironic now, this slogan had a lot of supporters back then.

And what is the grand narrative of ETH 2.0?

Review of the DeFi speculation boom

The listing of COMP in June kicked off the massive speculative wave in DeFi, which lasted for nearly three months. It coincided with the retreat of the frenzy of DeFi speculation. Let’s review it. It can be said that in the DeFi speculation wave and the earlier Dapp speculation wave in 2018 (mainly ETH/EOS/TRON), public chains have used their strength and efforts to prove that there are only two categories in the public chain sector: ETH and ETH’s competitors. A large amount of data is constantly proving this fact to us.

The listing of COMP in June kicked off the massive speculative wave in DeFi, which lasted for nearly three months. It coincided with the retreat of the frenzy of DeFi speculation. Let’s review it. It can be said that in the DeFi speculation wave and the earlier Dapp speculation wave in 2018 (mainly ETH/EOS/TRON), public chains have used their strength and efforts to prove that there are only two categories in the public chain sector: ETH and ETH’s competitors. A large amount of data is constantly proving this fact to us.

Dapp.review: 7-day statistics of public chain transaction volume

In terms of transaction volume, compared with ETH, the transaction volume of all other public chains is almost compressed into a horizon.

Justswap liquidity and transaction volume (weekly)

Even TRON, the best performing public chain besides ETH in this round of DeFi, still could not escape the fact of a sharp decline.

On the other hand, the core applications of ETH have accumulated a user base. From the data, the amount of ETH's DeFi locked-in has not decreased significantly as the speculative wave subsides.

Defipulse: Uniswap locked amount

Defipulse: Compound locked amount

Whether it is Uniswap, the leading application of DEX, or Compound, the leading application of lending, the locked data is still rising steadily.

Uniswap.info: Trading Volume (Weekly)

*The third red column from the bottom is the abnormal transaction caused by the Harvest hacker attack

Judging from the trading volume, despite a significant decline, Uniswap still maintains a level far exceeding that before August 2020, and the locked amount continues to increase.

Uniswap has shown the same resilience as BTC, and the "silt" accumulated after the tide recedes provides them with better soil for growth.

For the cryptocurrency market, DeFi speculation has receded, but DeFi has not receded, and ETH has not receded either. History has proven that ETH has won. Blockchains like Thunder and Algorand that simply have the advantage of being fast are no longer sexy.

The Grand Narrative of ETH 2.0

For ETH, the only competitor now is itself, and how to better meet the needs of the crypto masses is the top priority. An ironic fact about crypto culture: the core of the crypto world is currently a centralized exchange that is not crypto at all. The exchange is the de facto center of crypto power.

Then all this is quietly changing. Dapp and DeFi have given the crypto crowd the best preview of blockchain life, opening up our horizons. It turns out that using a wallet, we can perform various operations such as transactions and lending while retaining control of our assets.

ETH is already standing at the doorstep of the crypto hub, ready to break in at any moment.

And before it were two of its own shackles: the inability to cross chains and low throughput.

There is no systematic solution like DOT for cross-chain, but cross-chain bridge solutions like REN are not unavailable. After all, in the absence of revolutionary progress in other public chains, strong user inertia makes ETH still the center of the Matthew effect.

Coingecko: Market capitalization ranking

Wrapped assets will be accepted as trusted assets. WBTC has already occupied the top 15 in market capitalization, and wrapping other currencies is not difficult to achieve technically. In the third quarter, we also saw other public chain currencies such as TPT and FNX migrate to ETH in a centralized manner.

As for the speed limit. This limitation of ETH has made EOS and TRX, as higher-performance public chains (more centralized than ETH), gain greater momentum when Dapps for trading and mining emerged. At the same time, it has also prevented derivatives, which rely on high-speed liquidation, from becoming popular on ETH.

Order book DEXs such as EtherDelta and IDEX have always been a relatively niche presence among exchanges. The rise of Uniswap this round is due to the alternative breakthrough of the AMM method.

Coingecko: Spot CEX Trading Volume Ranking

Coingecko: DEX Trading Volume Ranking

Uniswap’s trading volume is currently 5.9% of Binance’s. However, centralized exchanges generally have the behavior of brushing volume. If we compare it with Coinbase, which does not brush volume, the proportion can reach 35%. In the Coingecko ranking, excluding the exchanges that we know of that obviously brush volume, Uniswap’s trading volume ranks 11th.

In other words, after Uniswap, there will be no second-tier exchanges. And after ETH 2.0, there may be no first-tier centralized exchanges after XXswap. With the current performance of ETH, Uniswap can enter the historical arena as a challenger to first-tier exchanges, not to mention the expectations brought by ETH 2.0's high performance. It can be said that when ETH 2.0 matures, the world's largest cryptocurrency exchange can only be DEX.

Yesterday's MTGox is today's Okex. (Okex founder Xu Mingxing was investigated by the police for allegedly assisting in money laundering, which paralyzed Okex asset withdrawals.) DEX and CEX are equal in front of hackers. But CEX can never give users the real control over their assets that DEX can give them.

The grand narrative of ETH 2.0 is ETH, the blockchain. It will have a huge siphon effect on the crypto world outside of ETH. All public chains that cannot keep up will be siphoned by ETH, and all exchange tokens that cannot keep up will be siphoned by ETH. High-performance public chains will give rise to more applications, and these applications will consolidate the foundation of ETH. It can be said that ETH 2.0 represents the only one in the world except BTC.

The three phases of ETH 2.0 and low inflation

Ethereum 2.0, also known as Serenity, is the next major upgrade to the Ethereum blockchain.

Ethereum 2.0 is planned to be launched in at least three phases: Phase 0, 1, and 2. Phase 0 is scheduled to be launched in 2020, and Phase 1 and Phase 2 will be released in the next few years.

Phase 0: Starting the Beacon Chain

Phase 0 focuses on getting the validators on the Beacon chain up and running. Users can deposit 32 BETH (BeaconETH) on the chain to become a validator, but in this phase the validator only manages the Beacon chain, and there is no shard chain at this time.

The Beacon chain will keep its iterative design as simple as possible in the early stages. Accounts, asset transfers, and smart contracts are not supported at this stage. BETH can only be used by validators, and cannot be transferred on the chain or traded on exchanges.

The Beacon chain is a brand new PoS blockchain. It is the core component of Ethereum 2.0. ETH 2.0 also includes three parts: shard chain and virtual machine layer.

The original ETH 1.0 will become one of the shards of ETH 2.0. Because there are two chains, there will be two tokens, ETH and BETH, during the operation.

Phase 1: Start the Shard Chain

Phase 1 will add shard chain components to realize Beacon chain + shard chain. However, this phase is just a trial run of the shard structure, not a real expansion using shards. The Beacon chain regards the shard chain block as a simple collection of bits without structure or meaning. The shard chain still has no accounts, assets, or smart contracts at this time.

The Beacon chain will support 1024 shard chains, each of which will be verified by a committee of 128 validators. The Beacon chain randomly selects shard validators for each shard in each cycle, and the shard validators prove the content and status of the shard through "crosslinking".

It should be pointed out that in Phase 0 and Phase 1, there is no data flow between Ethereum 1.0 and Ethereum 2.0, and Ethereum still runs on the PoW chain.

Stage 2: Start the virtual machine layer

Phase 2 will add a virtual machine layer, which is the last important component of Ethereum 2.0. Ethereum that implements Beacon chain + shard chain + virtual machine layer is a complete public chain system that we are familiar with. The availability of Ethereum 2.0 will be officially realized in this phase.

At this point, smart contracts are introduced into the system, and assets can be freely transferred on the chain; the shard chain changes from a simple data marker to a fully functional blockchain, and cross-linking operations support cross-shard communication; some of the most commonly used development tools may also be ported to Ethereum 2.0 to support EVM2. EVM2 is Ethereum's new virtual machine eWASM, based on Web Assembly, and supports multiple programming languages ​​to implement smart contracts.

Not to mention Phase 2, even Phase 1 will take 1-2 years, which means that the current launch of ETH 2.0 is still a long way from real applications, which means that even if ETH 2.0 has a climax before December, it is only a climax of speculation. Don't have too much expectation for ETH 2.0 in the short term. At the same time, this also means that before the real 2.0 comes, the contradiction between ETH's current low operating speed and the increasing number of applications makes layer2 a direction worthy of attention.

Let's summarize. The core upgrade of ETH 2.0 is POS+sharding, both of which exist to improve the scalability and throughput of ETH.

ETH 2.0 Launch Progress

Ethereum 2.0 is scheduled to be officially released on December 1, and the genesis date is set for January 3, 2021, the 12th anniversary of the birth of the Bitcoin network. The launch requires a pledge of 524,288 ETH.

The progress of ETH 2.0 launch can be viewed in real time on this website

https://launchpad.ethereum.org/

The current progress is about 9.6%. The progress has been advancing, but there is a high probability that the launch conditions will not be met on December 1.

When the pledge start condition of 524,288 ETH is reached, the yield is 21.6%, and you can continue to pledge. When it reaches 10M ETH, the yield is 4.9%, which means the final inflation rate is about 0.43%. This is not high, and the pledge rate at this time is about 8.8%. The inflation rate of ETH based on PoW is about 11.20% per year.

It is well known in the crypto community that Bitcoin’s current inflation rate is about 1.8%, which is better than the inflation rate of a basket of global fiat currencies, which is about 2.99%. That is, when ETH 2.0 is launched, ETH’s inflation rate will be better than BTC’s inflation rate.

And with the introduction of ETH 2.0 proposal EIP 1559, a large amount of transaction fees will be burned instead of being paid directly to miners. This means that if more transaction fees are burned than newly issued ETH, the net inflation rate may even be negative.

ETH miners capture all fees associated with Ethereum network transactions. In the past year, miners earned about 259,823 ETH ($59.7 million) in fees. But the miners' excessive huge profits did not help the ETH network itself too much.

It can be seen that the scarcity characteristic will become more significant in ETH 2.0. As we all know, the 21 million Bitcoins will never be issued, which has always been talked about and copied by various project parties as quotations. The deflationary ETH obviously has a larger imagination space in terms of single value.

ETH 2.0 Participation Guide

The threshold for building an ETH node is not high. You only need to hold 32 ETH and follow the official instructions and hardware standards to build it. There are three ways to participate

Build it yourself

It is not recommended for retail investors to participate. You have to make sure your node remains online at all times, as there will be margin penalties if it is continuously offline.

If you want to build your own, you can refer to the following article.

https://www.chainnews.com/articles/602578542483.htm

Trading Platform

In the past two years, centralized staking solutions such as Binance (Zhuanbibao) have become very mature and face sufficient competition. Ordinary users do not need to adopt self-built solutions at all.

Of course, the innovation momentum of mainstream trading platforms is not as fast as that of small exchanges, so the launch speed may be slower. Small exchanges will be faster in product launch, but retail investors are not recommended to participate. Because second-tier exchanges face a more difficult competitive environment as DEX becomes more mature.

On-chain service providers

For example, Ankr, Blox, Rocket Protocol, etc. provide non-custodial "one-click staking" methods, and all provide "group order pool" services to meet the needs of users who do not have 32 ETH. Ankr and Rocket Protocol also provide bonded ETH to ensure that the pledged ETH can still circulate in the market, which also eliminates the fear of most players about the loss of liquidity of the pledge.

It is worth mentioning that the process of ETH from Ethereum 1.0 entering the 2.0 deposit contract is one-way and cannot be reversed at this stage. According to official documentation, after the first phase of Ethereum 2.0, validators may be able to transfer funds, and after the second phase, validators can withdraw this part of the assets to a specific shard. The entire development process may take 2 years.

This may become a window period for speculation. During this window period, some ETH will be locked up as BETH, but more and more ETH applications still use ETH, which will reduce the actual circulation of ETH.

There is not much time left for other public chains. Whether you can do it or not, ETH 2.0 is on the way.

Summarize

As mentioned at the beginning, investing in a grand narrative can satisfy people’s need for self-realization. We know that this is not what everyone pursues, so you can also directly look at the conclusion about ETH 2.0:

1. The grand narrative of ETH 2.0 is ETH is blockchain

2. ETH 2.0 is a one-way channel, which will cause a short-term reduction in circulation and provide room for speculation.

3. Investing in second-tier exchanges has a very poor profit-loss ratio.

4. Investing in a public chain without a unique selling point has a very poor profit and loss ratio.

5. ETH 2.0 is still in the hype period. The real realization of ETH 2.0 requires a long period of time. Before that, Layer is a direction worthy of attention. Projects in this area include Near/Skale.

6. On-chain service providers include Ankr, Blox, and RPL (coins have been issued), which have a very obvious linkage when ETH rises on November 5. But please note that their real Stake services have not been launched so soon.