Ethereum, the second-largest cryptocurrency by market capitalization, set an all-time high of $ 1,439.33. This is the first time that the digital asset has exceeded the $ 1,400 level since January 13, 2018. Ethereum’s YTD earnings now total 66.15% – over 6x higher than the leading cryptocurrency and larger than Polkadot (DOT ) and Chainlink (LINK). Despite experiencing a temporary correction, it is still one of the strongest performers among the top 10 assets.
While there were not always obvious underlying catalysts to drive the rise to a new peak, ether had been close to breaking the key level for over two weeks after climbing to $ 1,350 on January 10. Growing market for devolved funding, which is known. as DeFi – which now holds over $ 24 billion worth of crypto assets in its protocols – is also a likely contributor to the bullish momentum behind the asset. Now, with Ethereum moving closer to uncharted territory, all eyes on the second-largest cryptocurrency will hit its next major milestone, the psychological $ 2,000 mark. This legendary level is more than a 50% return off the current price (press time), but there are 3 major events scheduled to go live in 2021 that could help make this possible.
1. The Future of Ethereum CME
The world’s largest derivatives platform, the Chicago Mercantile Exchange (CME), publicly announced on Dec. 16, its plans to launch Ethereum’s future by Feb. 8, subject to regulatory approval from the US Commodity Futures Trading Commission (CFTC). Derivatives are essentially trading contracts that allow investors to bet on the price of a future underlying asset without actually having to own it.
This new cash-settled financial product – meaning any profit made will be paid out in US dollars rather than ether – three years after the exchange was launched bitcoin futures, now the world’s most traded bitcoin futures product and accounts for over 20% of all open contracts.
Ultimately, the arrival of Ethereum’s future will bring more maturity to the crypto market and, while a future is not physically fulfilled, more liquidity. This is beneficial because it will give institutional investors in particular the opportunity to randomly hedge sites, which reduces the overall risk and in turn makes Ethereum a much more attractive investment.
2. Ether Burn and Predictable Charges
Any actions taken on decentralized applications (dapps) or Ethereum-based protocols are treated as transactions, requiring a fee attached to encourage miners to process them. At present, transaction fees are set through an auction system where consumers who attach the highest fees to their transactions receive the fastest processing by miners. This system causes a number of issues, which are unpredictable and often very high fees during periods of heavy congestion. Network congestion arises whenever there is an increase in trading activity. For example, if the price of ethereum changes suddenly and thousands of traders suddenly want to enter the market or leave at about the same time.
EIP 1559 is an Ethereum Enhancement Proposal submitted by project co-founder Vitalik Buterin, along with developers Eric Corner, Ian Norden, Rick Dudley, and Matthew Slipper, to implement changes to the way ether transaction fees be introduced to consumers, as well as ethereum supply management. EIP 1559 suggests abolishing the current auction system fee system in favor of an algorithmically determined base cost, called “BASEFEE.” The BASEFEE aims to introduce a uniform fee across all rising and falling ethereum-centric platforms and services depending on network activity. This means no more fee discrepancies between ERC-20 compatible wallets, protocols and exchanges. However, the EIP does include an option for consumers to tip miners should they want their transaction processed faster. The second function of EIP 1559, and the one that will likely have the biggest impact on Ethereum’s future price, is the introduction of burnt ether. Burning involves the complete removal of tickets, causing a decrease in circulating supply. EIP 1559 proposes to burn the BASEFEE so that the vast majority of ether used to process transactions is destroyed rather than given to network verifiers.
The idea is that this will encourage ether’s constant deflation, which in turn should help strengthen prices over time.
The EIP is expected to go live sometime after the Berlin hard fork, which could be as early as February.
3. Introducing Ethereum 2.0 Step 1
Ethereum is in the process of transitioning from a Proof-of-Work blockchain to one that operates using a Proof-of-Stake consensus mechanism, with the goal of becoming a faster, more efficient, and more scalable platform. There are four steps apart from the Ethereum 2.0 upgrade – Step 0, Step 1, Step 1.5 and Step 2 – each laying the technical foundation for the next until the final phase is complete.
Phase 0 went live on December 1, 2020, and saw the implementation of the Beacon Chain – a new blockchain layer that will coordinate activity between individual Ethereum shard chains.
Phase 1 is the next step in Ethereum development and will launch 64 shard chains. Eventually, all transactional activities across the network will be split among these separate chain blocks and processed. The benefits of this new system will be that the whole network will not need to validate transactions, just one shard chain. This will greatly reduce the time taken to confirm transactions, and means that the overall network will be able to handle significantly higher volumes without suffering the level of congestion it is currently making. .
Although there is no confirmed date for the launch of Phase 1, it is expected to arrive sometime this year.