• The Ethereum 2.0 protocol upgrade, which is called Serenity, may positively affect the Ethereum price over the coming months.

    Serenity seems to increase demand for Ethereum transactions because of its increased speeds, decreased costs, and more utility. Ethereum is required to send transactions, so demand for the cryptocurrency should rise as transactions increase.

    The more demand there is to use the Ethereum network, the more the price can rise, because there is a real underlying value being created for the user.

    Ethereum founder Vitalik Buterin has said that if EIP-1559 and ETH2 were implemented at current transaction levels, the supply of ether would actually stop increasing.

    The decrease in market supply of ETH combined with a stagnant and or increasing demand could increase the price.

    How Ethereum 2.0 can provide fuel to an ETH uptrend

    Although a multi-faceted upgrade, a spotlight has been put on how Ethereum 2.0 can abolish Ethereum’s current Proof of Work (mining) model in favor of Proof of Stake (staking). Both mining and staking are consensus ways that dictate how transactions are processed.

    Before explaining how this transition will potentially favor long-term upside in the market, it’s worth reading about the process of staking and mining.

    In Ethereum’s case, users that plan to participate in staking have to acquire 32 ETH. This is arguably a lower barrier to entry than Bitcoin mining, where most market participants operate in rural areas with extensive energy infrastructure.

    Ethereum validators, a term describing those who stake coins, are expected to earn 5~15% each year once Serenity launches. Although the rewards are dependent on how many other investors are verifying blocks and if one’s validating node is stable.

    Adam Cochran, a venture capital investor and adjunct computer science professor at Conestoga College, expects for these potential staking rewards to absorb a record influx of investment into ethereum.

    He explained that the implementation of staking will lead to a simultaneous negative supply shock and positive demand shock, creating a “price spike.”

    Cochran expects this rally to be fueled by retail investors and “whales” entering the market, both to take advantage of the rally and to ensure that they can activate a validator node.

    The investor added that Serenity will naturally rise the demand for Ethereum transactions on the network due to increased speeds, decreased costs, and more utility. As ethereum is needed to send transactions, demand for the cryptocurrency should rise in tandem with transactions. He explained about how Ethereum 2.0 will affect the Ethereum price:

    “We’re going to see ETH drastically increase its tx/s and therefore its commercial and consumer viability. Gas clogs, high transaction costs, long wait times in dApps all goes away, even in a busy market…  the more actual demand there is to use the system then the more the price goes up, because there is a real underlying value being created for the user.”

    Your rating to this post

    average scores 5 out of 5
    Vote count: 1 Vote