Ethereum is the second largest cryptocurrency by market cap and the top ranked overall altcoin. It’s place in the market is now nearly as important as Bitcoin. Without Bitcoin, Ethereum might never have existed, but without Ethereum the crypto market as we know today wouldn’t look the same. Most altcoins are made on the ERC-20 token standard and just about all of DeFi is built on Ethereum.
But as more and more is built on Ethereum, the network has become congested and caused fees to rise. To achieve greater scalability, speed, and throughout, the Ethereum development community is rolling out what they’re calling the Ethereum 2.0 upgrade and it could revolutionize the cryptocurrency market. Here’s everything you need to know about ETH 2.0.
Ethereum 2.0, also called the “Serenity” update or Eth2 is a major upgrade to the Ethereum blockchain that will be released in four distinct phases. Phase 0 of the upgrade began starting in December 2020, and will continue to be rolled out over time.
Ethereum 1.0 is the original and current Ethereum network, created by Vitalik Buterin. The crypto Phase 0 first launched this past December 2020 with the introduction of the Beacon Chain. The Beacon Chain contains the registry of all validators on the network. The Ethereum 2.0 rollout however will last through 2022 or potentially longer, so it is not fully released until the end of phase 2. is different from Bitcoin, because it enables smart contracts as part of each transaction. ETH 1.0 is the original Ethereum PoW chain.
Ethereum 2.0 brings with it a host of new improvements and benefits crucial to the overall blockchain upgrade, which heavily relies on shard chains, and a switch to a Proof of Stake mechanism (PoS).
With the current technology found in Ethereum 1.0, the system relies on the computing power of miners and a similar “Proof-of-Work” consensus mechanism to verify blocks and secure the network. The switch to PoS over PoW Ethereum, increases scalability, security, and overall efficiency. Rather than relying on miners like PoW Ethereum, the new PoS Ethereum uses validators and deposit of Ether – the name of the ETH token powering the Ethereum blockchain.
The added shard chain mechanism boosts throughput on Ethereum which is a much needed improvement due to the advent amd explosion in popularity of decentralized finance (DeFi). Shard chains in theory could increase transaction speeds by effectively splitting the data processing mechanism among many nodes. This allows for many transactions to be processed at the same time. Ethereum Foundation think tank ConSenSys compares each shard chain as adding a new “lane” to the “highway.” The more “lanes” the higher the throughput and the more scalability the Ethereum mainnet is able to achieve. Shard chains are not available as part of Phase 0, but will included in Phase 1 according to the roadmap.
Phase 0 first launched this past December 2020 with the introduction of the Beacon Chain. The Beacon Chain contains the registry of all validators on the network. The Ethereum 2.0 rollout however will last through 2022 or potentially longer, so it is not fully released until the end of phase 2.
Proof of Stake (PoS) is a consensus algorithm that relies on validators that are rewarded with additional ETH for validating transactions on the Ethereum blockchain. Validators are essentially “virtual miners” serving a similar, yet less wasteful function.
Proof of Work (PoW) relies on a energy-hungry process and consumes hash power created by miners. No BTC is required to mine for BTC, while Ethereum validators must stake ETH to activate additional rewards. Proof of Stake coins allow for sharding, able to potentially improve scalability and throughput.
The Ethereum 2.0 roadmap consists of four distinct phases, which include:
The scalability and improvements that Ethereum 2.0 brings to the table will enable much faster transactions and Dapps. Fees should lower and allow for more innovation at less cost for users and developers alike. DeFi apps will be able to scale to meet and exceed the throughputs of traditional centralized financial systems.
The launch of Ethereum 2.0 has already proven profitable for ETH holders. Since it was launched in December 2020, the price per ETH has grown by 150% and set a new all-time high over its 2018 peak. The breakout from bear market resistance has sent the asset into a new uptrend. Past uptrends have resulted in incredible ROI. The below image demonstrates what could happen if a similar rise happens post-breakout.
Ethereum 2.0, Bitcoin FOMO, and general bullish crypto market sentiment has sent ETH into an uptrend against the dollar. This makes “buying the dip” with long positions potentially extra lucrative. But even the strongest uptrends have pullbacks and eventually come to an end, so it is important to prepare with trading strategies that approach both directions of the market.
That’s why relying on an award winning crypto trading platform is key to successfully making money with the opportunity ETH 2.0 provides. PrimeXBT offers long and short positions on Ethereum, Bitcoin, and other crypto, as well as forex, stock indices, gold, oil, silver, and more.
Here are some common ETH trading strategies, along with a tip on how to potentially spot a trend reversal before it happens. In the below chart, the Bollinger Bands are enabled on the week ETHUSD chart. The Bollinger Bands consist of a moving average and two standard deviations that widen and contract, measuring volatility. The middle moving average, however, can also be used as a reliable short or long signal, when price action passes through it and closes.
An intraday strategy can also be employed using the MACD. The MACD is called the moving average convergence divergence indicator. When the two moving averages diverge, it signals overbought or oversold conditions. When they converge and crossover, it can act as a powerful signal.
The MACD is a lagging signal, however, and as the example below shows, it is extremely effective but stops need to be adjusted to allow for some fluctuations in price. So long as risk is properly managed, the signal is ultimately profitable.
The example below shows the conclusion of the last bull market compared to the current. Both times Ethereum entered the “bull zone” on the weekly RSI. This high of a reading on the Relative Strength Index suggests the altcoin is highly overbought, but during strong trends assets can remain overbought or oversold for extended periods of time.
One way to spot when a top is potentially in, is to watch for large bearish divergences. A bearish divergence happens when price action rises to a higher high, but an indicator fails to make a corresponding high. The last major bearish divergence started the bear market and could help provide clues to when the uptrend has ended and when it’s time to go heavily short.
Ethereum 2.0 stills leaves some ambiguity related to its final phase, and considering all of the similarities between ETH 1.0 and 2.0, there are bound to be some questions that remind. In the below FAQ, we’ve compiled answers to some of the most commonly asked question regarding the Ethereum Serenity 2.0 upgrade.
Yes, technically Ethereum 2.0 did launch with a release date in December 2020 with Phase 0. But because it is a rollout across multiple phases, the full vision for the upgrade isn’t yet available. ETH 2.0 will roll out across four distinct phases: phase 0, phase 1, phase 1.5, and phase 2.
No, Ethereum 2.0 is an upgrade to the Ethereum 1.0 blockchain and coin. Existing ETH will automatically work with the ETH 2.0 contract address once deposited.
Yes, the older Ethereum blockchain will be phased out and essentially become the first shard of Ethereum 2.0 in phase 1. Currently, Ethereum 1.0 blockchain will continue to be improved until phase 1.
Ethereum 2.0 has nothing to do with price action whatsoever, but is has caused more investors to become interested in the project, and because earning rewards requires a certain amount of ETH to be staked, there has been an increased demand for the token as a result of Ethereum 2.0, which in turn is driving up prices.
Ethereum 2.0 is one of the primary catalysts driving the Ethereum bull market. The rush to buy enough ETH to earn staking rewards has driven up prices, along with general interest surrounding.the upgrade. Coinciding with all of this is a greater crypto market uptrend and an explosion of DeFi applications that use ETH as fuel for transactions. All this has caused Ethereum to set a new all time high and it could only be the start of what’s to come.
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