Ethereum plummeted 20% “behind the scenes”: probably Chinese investors
“It was like riding a roller coaster.” Investors are commenting on the recent currency price trend of Ethereum.
After several months of decline, Ethereum achieved growth above the average level of the coin market in just a few days; then, it made a U-turn and fell again. Behind the price of the currency, the Ethereum community is preparing a long-overdue plan — the “Constantinople” upgrade. After that, Ethereum will gradually move from PoW to PoS consensus. This means that Ethereum mining revenue will gradually decline until it returns to zero. Miners are leaving the market, but Ethereum is expected to experience an explosion in performance. Countless competitors are eyeing Ethereum's status as the “king of public chains.” The future of Ethereum is still uncertain.
Big boom, then big drop: Soon after reaching the recent high of $158, the price of Ethereum began to drop rapidly.
Ethereum, which has always been in decline, unexpectedly came out of a sharp rise: in just 6 days, it climbed from an annual low of $81.9 on December 16 to the aforementioned high, surging 92%. “The price of Ethereum is back in four digits.” On December 24, when Ethereum was suddenly raised from $128 to $145 (RMB 1000.38), an investor lamented. This exclamation is quite sad: at the beginning of 2018, the price of Ethereum was still 1,400 US dollars, equivalent to about RMB 9,627, which is more than 9 times what it is now.
In any case, with the sharp rise of Ethereum some time ago, mainstream digital currencies such as Bitcoin, XRP, and EOS also surged across the board, with an average increase of more than 10% in 24 hours. However, the good times didn't last long. Soon, the price of Ethereum began to fall like a cliff. The sharp drop began at 23:00 on December 24. Within 1 hour, its price fell from $158 to $144, a drop of 8%. Another round of decline followed. As of 19:00 on December 25, Ethereum had fallen to $127.22, with a cumulative decline of nearly 20%.
“I just want to curse people. Only domestic bookmakers can do this kind of game.” An investor told a blockchain reporter. Yu Yang, COO of the Mining and Maritime Association, also believes that the current roller coaster market is probably due to tourism investment. So-called floating capital is liquid capital with a sensitive sense of smell and extreme greed. They see the moment, smell the wind and move in and out quickly. What supports Yu Yang's judgment is that most of the capital flowing into Ethereum this time is USDT. The time point for the draw was chosen at 8:00 a.m. Beijing time, and there was also cooperation from CCTV news. “It is probably due to Chinese tourism.” he said.
A sharp rise followed by a sharp drop, which indicates that tourism capital has begun to retreat. Meanwhile, financial columnist Yin Haotian believes that one reason for the current currency price fluctuation is a game between bulls and bears. “Bitcoin is on the $4,000 price line, and there are many short orders,” Yin Haotian said. “The bulls used to raise the price of Ethereum to drive up the price of Bitcoin and eat up the short orders.” Why aren't bulls directly driving up the price of Bitcoin? He said this reflects the lack of capital in the digital currency market — the main capital is not enough to push the price of Bitcoin to the point of bursting out of empty orders. This also confirms from the side that the drawing capital is likely to come from floating capital.
He believes that another reason for the sharp decline was the sudden collapse of US stocks. On December 24, Beijing time, US stocks fell sharply, and the three major stock indexes all fell by more than 2%. Among them, the S&P 500 index and the Nasdaq index have already fallen into a bear market. “The sharp decline in US stocks completely destroyed investors' psychological defenses, causing them to sell in a panic.” He analyzed.
Why are investors focusing on Ethereum at this time? Among the many external reasons, Ethereum's upcoming “Constantinople” upgrade is probably one of the reasons. What does Ethereum's “Constantinople” upgrade mean?
According to Ethereum's roadmap, from launch until now, Ethereum will go through four major stages, which are named: Frontier (Frontier), Homestead (Homestead), Metropolis (Metropolis), and Serenity (Serenity). Among them, the third stage is divided into two parts — “Byzantium” and “Constantinople.” They are all ancient names for the famous Turkish city of Istanbul.
In October 2017, the Ethereum network completed the Byzantine upgrade at block height of 4370000. According to the original plan, in the second half of 2018, Ethereum should complete the Constantinople upgrade. However, due to the continuous emergence of new EIPs (Ethereum Improvement Proposals, Ethereum Improvement Proposals) in the Ethereum community, time has been delayed over and over again.
Until the Ethereum core developer conference on December 7th. At the meeting, the Ethereum community agreed to enter the Constantinople phase in the 7080,000 block (around January 14, 2019). At this stage, Ethereum's consensus mechanism will gradually switch from PoW to PoS, and eventually enter the “quiet” phase of full PoS.
According to the plan, during the Constantinople phase, Ethereum's performance indicators such as TPS, sharding, state channels, and node distribution will be improved in all aspects. At the same time, however, due to changes in the consensus mechanism, miners in the Ethereum network are also facing a situation where their interests are damaged.
In September of this year, the Ethereum community released EIP-1234, which plans to reduce the block rewards generated by mining from 3 ETH to 2 ETH. This is already the result of mutual compromise between the Ethereum community and the miner community — in EIP-1011 in April of this year, Ethereum developers even planned to reduce the reward to 0.6 ETH. From a technical point of view, a major version upgrade such as Constantinople itself is a “hard fork” — only nodes that agree to the upgrade can continue to join the Ethereum network. If the Ethereum community fails to agree on an upgrade and the consensus collapses, it will lead to the creation of new forked Ethereum coins.
Looking back at history, Ethereum has also produced forked coins like Bitcoin — Ether Classic (ETC).
In mid-2016, the DAO, the star ICO project on Ethereum, was hacked, and 3.6 million ETH were stolen, accounting for about 5% of the total amount of Ethereum at the time. In response to an appeal from community leaders such as V God, Ethereum executed a hard fork on July 20 to roll back the stolen ETH. However, 10% of the Ethereum community members still voted against the hard fork. They continue to “stay behind” on the original Ethereum chain, and Ethereum Classic (ETC) was born since then. Today, ETC's price is 4.7 US dollars, with a total market capitalization of 560 million US dollars, less than 5% of Ethereum. As a result of the Constantinople upgrade, the group of miners whose mining revenue has been damaged may become a new “destabilizing factor.” If miners cooperate to resist the upgrade, the Ethereum network may create new forked coins.
Will Ethereum Embark on BCH's Fork Path?
“At the moment, it probably won't,” Li Ni, vice president of Netbook Technology, told a blockchain. “The BCH fork is a rivalry between two different interests emerging in the community. Looking at it now, the vast majority of people in the Ethereum community still support the Ethereum upgrade.”
He believes that after the upgrade, Ethereum reduced mining block rewards. This is similar to Bitcoin's production being halved every four years, and may be beneficial to the currency price. Chen Lin, an Ethereum miner, also thinks the same way: “There are fewer coins to mine, but the price of the currency should be able to rise, and the actual profit will not necessarily be less.” He deployed dozens of Ethereum video card miners in Jiuquan, Gansu.
Unlike ASIC miners commonly used in the Bitcoin mining industry, a large number of mining machines on the Ethereum network still use video cards to mine. Compared to “dedicated” ASIC miners, video card miners can mine multiple currencies such as Ethereum and Monero. Even if they encounter a “mine disaster,” miners can sell video cards to gamers, and the miners won't become “scrap metal.”
According to Chen Lin, this is one of the reasons why it is difficult for miners to dominate the hard fork of Ethereum. “Unlike Bitcoin, Ethereum does not have a 'giant' representing miners like Bitmain,” he said. “There is no strong enough power to dominate the fork of Ethereum.” According to Ethereum's upgrade plan, after Constantinople is upgraded, the Ethereum network will introduce a “difficulty bomb”. Mining revenue will be gradually lowered until it drops to 0. In the process of reducing earnings, all miners will be eliminated. “The Ethereum white paper actually already indicates the roadmap: use PoW for the time being, but one day, it will enter the full PoS era,” Li Ni said. “The entire community, including miners, is in agreement on this.”
On October 31, in Prague, the Czech Republic, the Ethereum community held its 4th developer conference. V took the podium to explain his understanding of “Ethereum 2.0” to nearly 3,000 developers offstage. During the 30-minute speech, V God kept waving his arm. His iconic pink watch was particularly striking in the light. God V appeared at the 4th Ethereum Developer Conference V God appeared at the 4th Ethereum Developer Conference. “Ethereum 2.0 can handle 1000 times more transactions than the current version,” V said. “This will make Ethereum a real world computer.”
After experiencing a series of setbacks such as the decline of ICOs, falling currency prices, and the impact of public chain competition, the Constantinople upgrade is the only way for Ethereum to move towards the 2.0 era. But Ethereum still faces huge challenges. According to DappRadar data, some of the most popular Dapps on the Ethereum platform have fewer than 1,000 active users recently. However, public chain platforms such as EOS and Wavefield have surpassed Ethereum in terms of active users and number of transactions. This is an advantage brought by the consensus mechanism — compared to Ethereum, EOS and Wave Field have higher TPS and no fees.
“However, today's EOS and Wave markets are filled with a large number of gaming games. The overall ecosystem of Ethereum is relatively much healthier.” Zhang Kang, head of a domestic public chain project, told a blockchain reporter. According to DappRadar data, EOS and Wavefield have 14 and 12 gaming apps in the top 20 Dapps calculated by daily active users, respectively. On the Ethereum platform, most of the top 20 Dapps are exchange and gaming applications.
According to DappRadar data, the Ethereum platform also still has an advantage in terms of the number of Dapps. Of the 1,579 Dapps included in DappRadar, 1304 are all based on the Ethereum platform. The number of Dapps on EOS and Wave Field is only 226 and 49, respectively. “Ethereum has an advantage in the number of Dapps, but in terms of growth rate, EOS and Wave Field are surpassing Ethereum.” Zhang Kang said that until today, Ethereum's TPS has remained at the level of 20-30. If it doesn't improve, its competitiveness will get worse and worse.
Investors' anxiety about Ethereum is directly reflected in the price of the currency. Since the small high in May of this year, the price of Ethereum has fallen by 84.7%, making it one of the mainstream coins with the strongest decline in the past six months. “At present, it seems that the recent speculation about Ethereum is still in the shipping stage.” Yu Yang told a blockchain reporter that in the short term, the price of Ethereum will continue to fluctuate until this wave of trading capital completely withdraws.
God V, the soul of Ethereum, now has the ID “Vitalik Non-Giver of Ether” (Vitalik Non-Giver of Ether) on Twitter. Previously, when the price of Ethereum was high, people on Twitter often posed as God V to defraud money in the name of “sending ETH.” As the price of Ethereum declined, the scammers gradually disappeared.
Today, V's main work on Twitter is also shifting from “catching crooks” to boosting the confidence of Ethereum investors. On December 10, he posted 15 tweets explaining his views on Dapps and blockchain: “Compared to central servers, blockchain cannot reduce computational costs. Instead, blockchain reduces social costs by 'increasing computational costs'.”
“In the past 70 years, labor costs have increased 2 to 10 times, but computational costs have been reduced by 1 trillion times,” V God said. “It is clearly cost-effective to reduce social costs at the cost of calculation.” How to balance computational costs with social costs is a difficult problem to choose for Ethereum's transformation from PoW to PoS. In the public chain market, competitors such as EOS have challenged Ethereum by relying on lower computational costs. Ethereum, on the other hand, still makes repeated trade-offs in how to reduce computational costs. If you don't evolve, you die. This is an unbreakable truth.
The upcoming “Constantinople” upgrade is definitely good for Ethereum. However, in a bear market, whatever the hustle and bustle may be used by capital as a tool to cut chives.
Source: Blockchain
