Ethereum continues to be one of the most talked-about digital assets in the crypto space. This is because of the aggressive developments that the network has been doing in the past months. In detail, the Ethereum 2 protocol is one of the hottest topics right now in the crypto world. Furthermore, this upgrade that ETH is constructing promises a lot of great things, including energy and gas issues in the network.
It is these achievements that made Ethereum notable in the crypto world. As a result, the crypto community’s eagerness to know more about ETH upgrades continues to rise. In addition, there are firms in the crypto world that can have the chance to talk directly with the ETH tech team. For instance, a podcast by Into the Bytecode showcases a conversation between ETH1 and ETH2 lead coordinators Tim Beiko and Danny Ryan.
In this article, we will discuss more about the future of the Ethereum protocol and its users’ benefits.
What is Merge
By now, we all know that Ethereum is on its way to completing its ETH2 upgrade, and it is massive. In fact, the ETH2 is composed of three separate phases: The Beacon Chain, The Merge, and The Shard Chains. In this article, we will focus more on the second phase, which is the Merge upgrade.
The Merge upgrade is the phase where the Ethereum chain will officially switch to the Beacon Chain as its consensus mechanism. Furthermore, this upgrade will enable staking on the entire network. In other words, Merge will swap-out the current proof-of-work (PoW) consensus mechanism with a more eco-friendly proof-of-stake (PoS) consensus mechanism.
In terms of energy consumption, the Merge upgrade might find a solution to end this problem. For instance, Ethereum’s proof-of-work energy consumption today is almost equivalent to the energy used by the country of Denmark. However, with the ETH2 upgrade, the network’s energy consumption will be reduced by at least 99.95%. Based on the graph above, the current PoW energy consumption is like the Leaning Tower of Pisa, while the ETH2 PoS would be a little as a .025m screw.
As of the launch date of Merge, there is still no exact date.
What is Mev
Miner Extractable Value (MEV) or Maximal Extractable Value is also one of the hottest topics in the Ethereum network. In fact, MEV plays an important role in ETH2. In detail, the ETH2 validators stand to earn as much as 1.93 ETH per year. This is 70.9% more than they are currently earning from network rewards alone, with the addition of MEV income.
Furthermore, MEV can only be extracted by validators who are proposing blocks. Through this, the income between validators with block proposal activities versus validators with other responsibilities will increase greatly. Indeed, ETH2 brings many changes to the ETH network.
Last but not least, we will discuss the staking derivatives and its benefits to their users.
Staking Derivatives Explained
From the podcast, Beiko and Ryan also discussed staking — staking operators, staking derivatives, and the like. To understand deeply, allow us to take you through this concept step by step.
In the crypto space, you will encounter primary assets and staking rewards. To put it simply, staking rewards refers to the ‘yields’ or actual shares that a network grants to its validators. In contrast with this, primary assets are the native assets that capitalize and coordinate with PoS Networks ( e.g. XTZ, ATOM)
These two are important to note in order to comprehend the concept of staking derivatives. Going further, we can now differentiate between crypto derivatives and staking derivatives. Crypto derivatives are simply the products directly linked to primary assets. On the other hand, staking derivatives are the products linked to the amount of staking rewards. More so, these awards are distributed to network validators and participants by the network.
Classification of Staking Derivatives
There are three classifications of staking derivatives. Staking derivatives by product, domain, and nativeness.
1. Staking derivatives by product
This refers to legacy products and staking crypto primitives.
- Legacy Products refer to those products that the financial market lends.
Example: swaps, futures, options, repo, etc.
- Staking Crypto Primitives are the variety of products that aim to evade a certain ‘risk’, which is included in the PoS protocol.
Example: “on-chain DAO insurance product for downtime slashing on blockchain”
2. Staking derivatives by domain.
To note, there are economic risks related to staking. These risks have a multi-dimensional form. Stakeholders could experience losses depending on the interaction on the crypto network. Therefore, each domain has a list of instruments to avoid such losses. Namely: Security and Operability, Economics, Governance, Network Peculiarities.
3. Staking derivatives by ‘nativeness’
There are three main categories in this.
- Ad-hoc risk / Ad-hoc network – It is one of the easiest products to create and adopt. Also, this protects one single event on a single network.
Example: an ETH on-chain futures on gas return
- Cross risks / Ad-hoc network – This hedges multiple economic risks in a network.
Example: “a short position in a certain parachain lot future”
- Cross risks / Cross networks – This has the highest level of complexity and sophistication.
Example: a derivative hedging a staking reward in a network while selling the right to perform in another network.
To sum it up, the crypto market, even in its culmination stage, is still transforming. The concept of staking derivatives may even be futuristic but some experts say “staking is the quiet giant of the crypto yield”. In addition, when Ethereum 2.0 launched the Beacon chain last year, staking became more popular in the crypto space.
Furthermore, now that MEV is on ETH 2.0 and the Merge is in progress, the Ethereum community keeps a close watch. Some are confident that this will bring drastic changes to the entire network. To add on, experts say this can maximize the returns for holders and node operators while also broadening Ethereum’s anticipated success.
So, is this the future of Ethereum Protocol? We are yet to find out but for now, we can watch as the Merge ensues.
Rich Dad Poor Dad Author Issues Dire Warning on Inflation, Says He’s Buying Bitcoin, Ethereum and Two Additional Assets
Rich Dad Poor Dad author Robert Kiyosaki is concerned that working-class Americans will be wiped out by rising inflation unless they invest in several key assets.
In a YouTube video on The Rich Dad Channel, the widely known author says that true capitalism has been abandoned, and the government instead intervenes on behalf of banks.
“The reason they’re talking about inflation or deflation is because, way back when, in the 70s, a true capitalist would let a business fail. According to [Austrian political economist Joseph] Schumpeter, capitalism destroys inefficient companies.
If you look at one example, not too long ago there was Blockbuster Video. Then Netflix came along and they’re toast. They’re just gone. A true capitalist wipes out the inefficient or the obsolete.
But for the last so many years, since 1907 really, they’ve been saving the banks. The banks are so corrupt, and the reason the Federal Reserve had to come in was to protect the rich bankers.
And what they did was, back in 2008 there was quantitative easing, which is a very complex subject, but basically the Fed just prints money and gives it to banks to prevent them from failing. That’s not capitalism, that’s Marxism. That’s socialism, that’s communism. It’s called central banks.”
Kiyosaki warns that unlimited money printing as part of official government policy will eliminate the working class.
“The reason inflation is going to wipe out people is because the average person is a consumer. Everybody talks about, ‘T-bone steak [costs] this now, and gasoline’s this and toilet paper is that.’
That’s because… Everything’s to protect the bankers. And that’s why I feel for the working-class people. I think it’s criminal that our school system is part of Marxism. There’s no financial education in the schools and it’s not a mistake.
To the people who are complaining about inflation, just know it’s because the Federal Reserve Bank, the U.S. Treasury… they’re as corrupt as they come.”
The author tells his 1.8 million followers on Twitter that the recent 25% price increase at discount retail chain Dollar General is a bellwether event signaling that investors should protect themselves by picking up some cryptos like Bitcoin (BTC) and Ethereum (ETH), as well as gold and silver.
“Dollar Tree becomes $1.25 Tree. Inflation is a tax on the poor and middle class. Inflation makes the rich richer.
Get smart. Get richer. I am buying more gold, silver, Bitcoin, Ethereum, rental real estate, and oil. What are you buying?”
CNN Business reported this week that Dollar Tree cited rising inflation and the ongoing supply chain crisis as reasons why it planned to permanently abandon its longstanding $1 price point on all products.
At time of writing, Bitcoin is valued at $55,190, Ethereum is exchanging hands for $4,367, gold is going for $1,781, and silver is worth $22.44. Kiyosaki also issued a warning in September that a major stock market crash would occur in October of this year.
Ethereum is a better store of value than Bitcoin, academic research shows
- Recent research conducted by four Australian researchers concludes that Ethereum is a better store of value than Bitcoin.
- “Ethereum provides better inflationary hedging properties than Bitcoin, and Ether may therefore offer superior long-term value storage than Bitcoin, ” said the report.
Ethereum, the second-largest crypto by market cap, has been tipped by several experts including billionaire investor Mark Cuban, as second to none in terms of utility. Its smart contract has been used to power several blockchain-based projects like Decentralized Finance (DeFi), and Non-Fungible Tokens (NFTs). But in terms of a store of value, there has been a divided opinion among experts as Bitcoin is largely viewed as a better alternative to Ethereum and other cryptocurrencies.
Recent research conducted by four Australian researchers concludes that Ethereum is a better store of value than Bitcoin. According to the research paper, the recent EIP-1559 upgrade in August has been the reason for this conclusion. The EIP-1559 upgrade saw over one million ETH out of the 118,583,580 circulating supply burnt, and a portion of its transaction fees burnt as well.
The report stated:
Annualizing the rate of Ethereum creation since EIP-1559, the expected increase in the total Ethereum supply is only 0.98%, being less than half the 1.99% increase in Bitcoin supply which is almost certain in the same period.
Roughly 50 percent of the transaction fees of the 12,000 newly minted ETH per day were burnt according to the report. It was further stated that more ETH will be burnt as its robust ecosystem of decentralized finance sees increased demand.
If Bitcoin is “sound money”, Ethereum is ” Ultra-sound money”
The rampant money printing linked to the COVID-19 pandemic has recently led to higher inflation rising to 6.2 percent in the US by October. Bitcoin has during this period seen higher interest among institutional investors as it is believed to be a perfect hedge against inflation. However, the research states that ETH has a better store of value, and institutions are beginning to choose digital asset for this purpose.
Ethereum provides better inflationary hedging properties than Bitcoin, and Ether may therefore offer a superior long-term value storage than Bitcoin.
According to Shark Tank investor and now an ambassador for FTX exchange Kevin O’Leary, if Bitcoin is considered as a “Sound Money”, then Ethereum is “UltraSound Money”.
If Bitcoin is sound money because of the 21 million coin supply ceiling, Ethereum enjoys the same benefit now. It’s ultra sound money because there’s no supply floor […]. Ethereum will be thought of like a traditional business and can be analyzed like one, sort of like using a cash flow model
Nikhil Shamapant, an independent ETH analyst, trader and medical doctor from New York City. He believes that ETH will be inflationary as it will spend most of its movement in the medium term in the inflationary environment.
Ethereum Breaks New Record Amid 13% Rally, Options OI Reaches $7 Billion
Ethereum breaks another market prior to end-of-year rally
Ethereum options hit a new all-time high as Ethereum continues to move in the local bullish rally started at the end of November, Wu Blockchain reports.
Contracts open interest spikes
Ethereum options currently remain at the historical peak in open interest that is currently staying at $7 billion. On Dec. 31, almost 700,000 options are going to be delivered with a “bullish” Put/Call ratio of 0.47. The approximate max pain price is $2,500 for the currently open Ethereum contract with expiry on Dec. 31.
ETH option holdings are at a historical peak. The largest option delivery date this month is December 31. 689,653 options for delivery, with 469,486 calls and 220,167 puts, and the Put/Call ratio is 0.47. The number of call options with an exercise price of $5000 is the largest. pic.twitter.com/xUaG3aMmBw— Wu Blockchain (@WuBlockchain) December 3, 2021
Increased options open interest closer to the end of the year is not something new for Ethereum. Ethereum open interest usually spikes near the end of the year as volatility on the cryptocurrency market increases and traders tend to hedge their positions.
What does high open interest tell traders?
Usually, options are utilized as a reflection of current market conditions. Since Ethereum is moving in both short and long-term bullish trends, call (buy) options are prevailing on the market with the majority of traders betting on the asset’s price spike to $5,000.
But while some traders may use options for speculative trading, others utilize them for hedging their positions. By opening put options on values like $4,300, traders hedge their positions in cases of unexpected market volatility.
Ethereum’s previous ATH currently remains at $4,880, and more analysts are expecting the second-largest cryptocurrency on the market to reach the long-awaited milestone by the end of the year when most altcoins have historically reached new highs.