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Ethereum 2.0

Ethereum 2.0 node count drops to a one-month low as ETH price climbs to new heights

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The number of Ethereum addresses holding 32 or more Ether (ETH) reached a one-month low on Nov. 9.

The number of externally owned Ethereum accounts (EOAs) holding at least 32 ETHfell to 108,949 compared to 108,965 on Oct. 22, according to data from Glassnode, a sign that traders and investors ignored the prospects of becoming validators on its upcoming proof-of-stake blockchain, dubbed Ethereum 2.0.

Ethereum addresses with 32+ ETH deposit. Source: Glassnode

In detail, staking in Ethereum 2.0 requires users to deposit 32 ETH into a designated smart contract address to become a full node validator. In doing so, the depositor gains the right to manage data, process transactions and add new blocks to the upgraded ETH blockchain.

That prompts Glassnode analysts to treat the Ethereum addresses with a balance of 32 or more ETH tokens as “potential validators.”

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Wealthy Ethereum validators only

The recent decline in the number of potential Ethereum 2.0 validators coincides with a steady Ether price rally.

Notably, ETH price surged almost 37% in the last 30 days, hitting a record high around $4,842 on Nov. 8. In other words, it now costs more than $153,000 to become a full node validator on the Ethereum 2.0 blockchain versus about $23,600 at the beginning of this year.

Meanwhile, data from StakingRewards.com shows that locking up 32 ETH for one year now returns an annual percentage yield of 5.42%.

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Ethereum 2.0 staking rewards as of 1600 UTC, Nov. 9. Source: StakingRewards.com

In contrast, holding spot ETH positions have returned almost 1,000% paper returns in the past 12 months, with the flexibility of profit-taking against potential downside risks.

ETH to $6K?

The number of Ethereum 2.0 validator addresses has also dropped as Ether prepares for a run-up towards $6,000.

The cryptocurrency’s latest climb to a record high of approximated $4,842 comes as a part of a Cup and Handle breakout that expects the ongoing bullish momentum to continue towards or beyond $6,000, as shown in the chart below.

ETH/USD daily price chart featuring Cup and Handle setup. Source: TradingView

The pattern develops after the price first rallies to the upside and then corrects to form a rounding bottom, called the Cup. A rebound towards the prior high ensues, followed by a failed breakout attempt above the said level.

The price pulls back again and grinds out a smaller rounding bottom, called the Handle. In the end, the price returns to a previous high for the second time and breaks out successfully to move by as much as the cup’s depth.

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Ether’s Cup depth is over $2,200 that sets its Cup and Handle profit target around $6,100. Should it happen, the cost required to become an ETH 2.0 validator will climb to $195,200.

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Ethereum 2.0

Developer shares insights on ETH 2.0 and why he’s ‘feeling good about Ethereum right now’

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Ethereum’s market cap dropped below $500 billion at press time. Needless to say that Ethereum’s short-term weakness doesn’t really bother its long-term investors as it still holds over $166 billion in TVL.

What’s coming?

Well, the network is gearing up for ETH 2.0, its biggest upgrade since 2015. As per developer Tim Beiko, both ETH 1.0 and ETH 2.0 teams worked together in October on the prototypes for the transition. With most “specifications in place,” Beiko explained what’s coming next in an interview. He said,

“What we’re doing during November is we’re trying to have these very short-lived test nets.”

But, even before that, ETH 2.0 deposit contract has topped the staked value of 100,000 ETH.

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With the confidence in the market, Beiko also hoped that they have something substantial before the December holidays. What Beiko was referring to is the Arrow Glacier upgrade that is projected to take place on 8 December 2021.

The developer commented that the Ethereum community is interacting to understand the changes that are to come. With that, the milestone of the ‘Merge’ is closer than ever. But, when is it scheduled for? Beiko answered,

“Next year, for sure.”

Also, Beiko added that if the codes are done by February, the Merge should commence somewhere in April or May. He also said,

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“It’s hard to give it a specific date just yet because if we find a major bug or something that takes us three weeks to fix you know, that delays things by three weeks.”

Nonetheless, the chair of all core devs at the Ethereum Foundation is looking quite optimistic, as he mentioned,

“I’m feeling pretty good about Ethereum right now”

100 days of EIP-1559

With ETH 2.0 in focus,  EIP-1559, which took place on 5 August this year, deserves a mention as well. According to Christine Kim, a Research Associate at Galaxy Digital,  “EIP1559 has saved users a total of $844 million in transaction fees through base fee refunds” since its activation.

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The improvement proposal is considered a milestone as it is set to begin a deflationary trend on Ethereum. Kim added,

“56% of new coins issued on #Ethereum has been offset by the amount of $ETH burned through base fees.”

However, there are still some shortcomings in the existing network. The researcher noted that the “average cost of sending a transaction on Ethereum has continued to climb.” While it has not decreased miner revenue, high fees remain a problem for Ethereum, according to Kim.

” Despite lower earnings from transaction fees, total miner revenue in dollar terms has increased 33%.

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In this context, Beiko agreed about the fees,

“I think we’re on the right path… If I could accelerate something it would be better tooling and migrations around layer 2. I think the fees on Ethereum are quite high right now. “

Having said that, Real Vision founder and investor Raoul Pal is seeing an Ethereum spike as much as 300% by December-end. He predicted,

“Now, I don’t expect perfection but with all the other analysis I have done, something like a 100% to 300% rally is highly probable into year end.”

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Ethereum 2.0

Study shows three attacks that can compromise Ethereum 2.0

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Ethereum 2.0 is being seen by the crypto community as a lifeline for a network that today suffers from transaction overcrowding and crushing fees. However, recent research produced by a group of computer scientists has shown that next year’s Ethereum consensus shift will not come without risks.

The study called ‘Three Attacks on Proof-of-Stake Ethereum’ was written by a group of six researchers from Stanford University (Joachim Neu, Ertem Nusret Tas and David Tse) and the Ethereum Foundation (Caspar Schwarz-Schilling, Bernabé Monnot and Aditya Asgaonkar), and tries to map the vulnerabilities that Ethereum will encounter in the future in its 2.0 version.

The research focuses on three different ways that the consensus-based proof of participation (PoS) network can be attacked. The first two weaknesses had already been identified in the past and would allow malicious agents to carry out a block reorganization attack and cause delays in consensus.

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The group’s new study, however, found a third type of attack that would be a sort of combination of the two threats already identified.

The Threats of Ethereum 2.0

The first type of attack concerns a possible short-scale reorganization of the consensus chain. The loophole could be exploited by an individual validator who wanted to increase their profit by delaying consensus decisions and thereby manipulating the blockchain in their favor.

This could be done by an attacker with enough resources to produce blocks faster than the original chain. By traversing the network, the validator could insert fraudulent blocks and perform a double-spend attack.

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In the second threat, network delay could be used to paralyze consensus decisions indefinitely. This attack, however, would depend on an ideal blockchain scenario to execute and its advancement could be prevented by only 15% of the validators in the network.

“We provide refined variants of these attacks, considerably relaxing the adversary stake and network time requirements and thus making the attacks more severe,” says the study.

The latest threat discovered by the researchers combines the loopholes of the two previous vulnerabilities, resulting in a third attack that is even more serious. In this scenario, an attacker could, with a small fraction of ether in stake and no control over the propagation of network messages, cause large-scale rearrangements in the consensus chain.

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“Honest-but-rational or ideologically motivated validators could use this attack to increase their profits or paralyze the protocol, threatening the alignment of incentives and the safety of Ethereum based on proof of participation,” warns the study.

While the study describes in detail the threats that Ethereum 2.0 could face in the future, it also proposes solutions that are likely to be taken into consideration by Ethereum developers, as half of the researchers have ties to the project.

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Ethereum

Ethereum 2.0 Team to Release a Fix Against Attacks Before the Merge: EF

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Danny Ryan, a coordinator at the Ethereum Foundation, shared the details of how Ethereum devs will fix newly revealed bug

On Oct. 19, 2021, a group of top-tier cryptocurrency researchers shared three scenarios of how Ethereum 2.0’s proof-of-stake (PoS) design could be attacked. EF’s Danny Ryan is sure that The Merge will not be delayed.

Ethereum 2.0 fix will be rolled out prior to Merge

According to the blog post shared by Mr. Ryan on Ethereum.org, the attack designs proposed by Standford University researchers are “serious” and dangerous to the stability of the ETH2 Beacon Chain.

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At the same time, all three attacks could be mitigated with a “simple fix.” As such, EF developers will implement this fix before the decisive phase of ETH1-ETH2 transition starts.

The deployment of this fix will not delay The Merge, Mr. Ryan assures. The rollout of this fix will not result in Ethereum chain reorganization (“hard fork”).

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The “Three Attacks on Proof-of-Stake Ethereum” thesis was uploaded as a pre-print to Arxiv.org three weeks ago. According to its text, three attack designs can be initiated against ETH2 stability.

ETH2 deposit contract is now more expensive than NASDAQ

The first one allows individual validators to increase their profits, while the second one can result in network collapse. The third scenario is a combination of the two techniques: it can cause unintended network reorganization even with a small stake controlled by malefactors.

Ethereum 2.0 is on track to roll out its proof-of-stake (PoS) mechanisms. More and more Ethers are locked in the deposit contract. According to Etherscan, there are 8,134,690 ETH locked in this contract.

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Amid an ongoing ETH price upsurge, the value of this contract spiked to an unbelievable $36.5 billion. Thus, one Ethereum contract is more expensive than NASDAQ, Japan Tobacco, Ericsson and Fujitsu.

Another 10% spike would make it equal to the top 500 companies by market capitalization.

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