What is the intrinsic value of ether?
This is a question I've been wrestling with over the past week as ether the price set a new all-time high of $1,439.33, according to CoinDesk Price Index.
Similar to the number of people watching the stream bitcoin assess the upward trend as credibly different from previous cycles for reasons related to greater institutional involvement and the general interest, among other reasonsI have the impression that the valuation of ether by investors is this time considered from a different angle.
The main reason why I think the valuation of ether has changed fundamentally during this market cycle compared to previous ones is that last December, Ethereum officially launched its parallel staking network, Ethereum 2.0.
If you are new to Valid Points and the topic of Ethereum 2.0 in general, be sure to check out our 101 explainer on Eth 2.0 metrics to familiarize yourself with the jargon and terminology used in this newsletter.
The average daily income of Ethereum 2.0 validators in terms of ETH is down slightly since last week. According to BeaconScan, average income fell during the month of January from 0.008063 ETH/day to 0.007768 ETH/day. However, in dollar terms, revenues have increased given the bullish price trend, which has pushed the value of ETH up 66.03% year-to-date.
User participation in the Ethereum 2.0 network has also been growing at a steady rate, with almost 900 new validators every day. There are over 65,000 validators, each staking 32 ETH worth around $45,000, at the time of writing. An additional 16,000 validators are waiting to enter the network over the coming weeks.
Due to the continued growth of new users on Eth 2.0, a higher percentage of the total ether supply is locked up and becomes unusable on the original Ethereum blockchain. About 2.4% of all ETH in circulation is now immobile as of Eth 2.0. Some Ethereum investors believe this percentage will increase to up to 30% in the future.
A significant percentage of the total supply removed from active circulation between decentralized applications (dapps) and user-to-user transactions impacts the velocity of ether as a digital currency. Velocity is the rate or frequency at which units of a currency are exchanged in an economy, or in the case of Ethereum, in a blockchain system. If we think of ETH as money, the speed of ETH is negatively affected by Ethereum 2.0.
However, as some Ethereum experts As we have highlighted, ETH, unlike BTC, is much more than a value transfer asset, or even a store of value. ETH can be thought of as a base asset needed to power a new decentralized web and financial system. ETH can also be considered a capital asset inextricably linked in value to the popularization and adoption of proof-of-stake blockchain protocols.
With the advent of Ethereum 2.0, long-term holdings of ETH represent long-term bets on the decentralized web and/or finance, as well as the viability, scalability, and security of proof-of-stake blockchains at the same level, if not more. degree, than proof-of-work blockchains.
There are a number of other use cases for Ethereum's native crypto asset, ether, beyond its use as payment for decentralized applications and staking on Ethereum 2.0. However, these are two things that will likely continue to drive investment in ETH as development of Ethereum 2.0 progresses.
Ether established a new record price to $1,439 for the first time in three years, about five days to date.
A lot has changed since then. In this week's New Frontiers, we'll look at some headlines – good and bad – that have defined cryptocurrency's journey since January 2018:
Initial coin offerings (ICOs) raised more money in the first three months of 2018 than in all of 2017, according to data collected by CoinDesk.
In April 2018, the company known for raising the most funds in an ICO was Telegram messaging application provider. The funds raised total $1.7 billion. However, in just a few months, blockchain startup Block.one would raise $4 billion thanks to its one-year ICO for the crypto asset EOS.
Mining is a nuisance for many Ethereum fans, which is why it will be phased out with Eth 2.0.
A new mining algorithm called Programmatic Proof-of-Work (ProgPoW) brought this conversation to life ahead of the Constantinople hard fork of February 2019. ProgPow would have made it easier for small miners to participate in the mining game. However, this measure was ultimately not implemented. This failure now constitutes a lesson on “how to do” decentralized governance.
The Constantinople and St. Petersburg hard forks were pushed live to the mainnet. The sixth and seventh backward-compatible code changes prepared Eth 1.x for its future marriage with the Eth 2.0 beacon chain. Ethereum made a hard fork twice again a year later with the Istanbul And Muir Glacier updates.
CoinDesk reported live from DevCon 5 in Osaka, Japan, Ethereum's last physical DevCon before the Covid-19 pandemic. The annual gathering of Ethereum developers reacted to Ethereum co-founder and CEO of venture capital firm ConsenSys, Joe Lubin, acknowledging that Ethereum would not be able to scale according to the original roadmap. Of course, that's what Ethereum 2.0 is for.
Ethereum startup Matter Labs has unveiled its layer 2 solution, Zk-Sync, to increase the number of transactions Ethereum can handle from its decentralized applications (dapps). Within a year, rollups would be widely considered part of Ethereum's long-term scaling roadmap.
Note: optimism at startup spear its own rollup variation called Optimism Virtual Machine (OVM) last Friday.
For Ethereum, 2020 was the year of decentralized finance (DeFi). These Ethereum-native applications enable trading, lending, and borrowing of digital assets. Total value locked (TVL) – a metric not unlike assets under management (AUM) – surpassed $1 billion in February 2020 and has since surpassed $25 billion, according to DeFi Impulse.
Eth 2.0 became a reality approximately five years after the launch of Ethereum with the release of Beacon Chain on December 1st. The new chain acts as the backbone of a future Ethereum network intended to handle more transactions at lower costs and claims to be greener. more user-friendly than proof-of-work alternatives such as Bitcoin.
We will soon integrate data directly from CoinDesk's Eth 2.0 validator node into our weekly analysis. All profits made from this staking venture will be donated to a charity of our choice once transfers are activated on the network. For a full overview of the project, see our announcement message.