Within the same cryptographic community, it can sometimes be difficult to follow every movement of a digital currency, either because of its volatility, its updates or the new uses that the public gives them.
That’s why the Delphi Digital research firm, recently published a report on the second largest Cryptocurrency by market capitalization, Ethereum (ETH), where they were not only trying to update their readers about what has happened to the asset, but to give their Perspectives on how this is being prepared for its final update: Serenity.
This study touches on topics like the behavior of Ethereum then of South Forks, reasons for the fall in the price of the asset, new uses of its Blockchain and the road towards Serenity.
The trace of the Forks
Ethereum, in addition to being one of the most well-known cryptocurrencies at present, has also been the subject of several controversial situations; Specifically, those that have to do with their bifurcations.
This is directly related to the ETH price falling after each of the 5 «hard forks» that it has had in its history, losing approximately 19% of its value in the next 30 days.
In fact, the largest recorded decline arose after the fork Homedtead, in March 2016, where ETH lost 30% of its value, from 12.5 to $8.
However, it did not happen with the last bifurcations. Constantinople and St. Petersburg, two of Ethereum’s most controversial bifurcations, failed to meet the paradigm.
Although the Cryptocurrency did fall after its release, there was no constant decrease the next 30 days as in the rest of the cases, but a loss of 6% of its value, which was recovered in less than a week.
This proves that, although it is true that the forks can bring with them a fall in the price of the cryptocurrencies (in this case, of ETH), they cannot be attributed all the responsibility, since it has been shown that the asset can recover from these losses.
ETH with its highs and lows
So, if it wasn’t the forks, what about the price of Cryptocurrency? To understand this, first you have to know what caused its growth.
According to the report, ETH’s value grew thanks to the sale of its tokens, as these had a big impact on the demand for the digital currency, especially during 2017 and the first half of 2018.
However, during the second semester of last year, this trend began to shrink, causing a lack of purchasing pressure for ETH.
It was from that moment on, reveals the research, which began to increase the amount of Ethereum in the exchanges. This fact also marked the start of the fall of 76% in the price of the asset.
On the subject of price, it is also important to mention the level of correlation that exists between digital currencies. The cryptocurrencies, including ETH, have a certain level of correlation with each other in terms of their movements in the market. This feature was perceived fairly well at the end of 2017 and almost all of 2018 between Bitcoin and Ethereum.
However, despite the correlation between the two currencies and the community’s perception of these cryptocurrencies, the report revealed that ETH had had a higher level of volatility than BTC during the 2018.
Finally, another element that significantly affects the price of Ethereum is the so-called ETH sentiment, which is the perception that users have of the digital currency. The research pointed out that «the average daily feeling score is a very strong indicator of the Ethereum price movement.»
This could explain why the price of Cryptocurrency has increased over the last few months, as the ETH sentiment was again positive since January of this year.
Ethereum Beyond the Cryptocurrency
But the rise of a positive ETH sentiment is not the only good news, as while the sale of tokens decreased, Ethereum began to grow in other areas.
During 2018 began to grow applications dedicated to providing tools to their users to be able to handle assets or money based on the network Ethereum. These are the so-called decentralized finance applications (Decentralized Finance), better known as «DeFi«.
By March 3, 2019, approximately 2 million ETH’s were in the DeFi Apps.
The road to Serenity… And the changes it brings with it
Serenity is the last «update» or branch planned for Ethereum. It plans to bring the network to higher efficiency levels and to provide better solutions to its users.
Among the changes that Serenity brings are lower confirmation times (from 8 to 16 seconds), greater scalability and, most importantly, the consensus change in the network, leaving behind the Proof of Work (PoW) to replace it by Proof of Stake (PoS). But this will be discussed later.
Serenity plans to be implemented in 3 phases: Phase 0, Phase 1 and Phase 2. For now, you will touch only phase 0, as it is the closest.
The first phase of Serenity (phase 0), will be to change to a Blockchain of PoS, called Beacon Chain, which will work in conjunction with the existing Blockchain of PoW.
Beacon Chain will handle and coordinate activities within the network, including those made by the validators, applying rewards and penalties, as well as ensuring the correct compliance with the consensus laws.
To launch phase 0, it is necessary to have accumulated a minimum of 524,288 ETH. It is planned to reach it between the fourth quarter of 2019 and the first of 2020.
From Proof of Work to Proof of Stake
One of the differences between the two forms of consensus more developed by the researchers, was related to the reward of the miners or validators of the network.
At the moment, with the PoW, the miners obtain a fixed reward of 2 ETH for each block and a variable reward that depends on the commission of each transaction.
When the network changes its forms of consensus to PoS, Commission rewards will remain, but there will be no more fixed rewards; Instead, they’ll all be variable.
They are variable because they depend on the amount of Ethereum bet, «where the incremental emission will increase at a decreasing rate as more of ETH’s global supply accumulates.» This means that the higher the amount of ETH accumulated and the higher the emission, the lower the percentage of reward that will touch each validator.
However, the authors of the report do not consider the proposed change for Serenity to be correct. They understand that they are trying to control the issuance of tokens, but consider that these measures can discourage some validators.
As for the future of Ethereum and the arrival of Serenity, it is important to be prepared for the change to PoS and all possible changes that this can bring.