What Coinbase’s Public Listing Means for Eth 2.0
There’s a lot riding on the success of Ethereum 2.0, including the crypto-industry’s largest U.S.-based exchange going public.
Last week, Coinbase released its S-1 filed with the U.S. Securities and Exchange Commission (SEC). In it, the exchange listed potential adverse factors against its business, such as the doxxing of pseudonymous Bitcoin creator Satoshi Nakamoto, negative perceptions of cryptocurrencies and the growth of cryto-native finance platforms generally referred to as decentralized finance (DeFi).
A failure or slowdown in “the development and launch timeline of Ethereum 2.0, including the potential migration of Ethereum to a proof-of-stake model” was also listed as a possible negative factor for the exchange going forward.
Data may make the point even better: Ether made up 15% of volume on Coinbase in 2020, compared to bitcoin’s 44%. Additionally, 13% of all assets stored on Coinbase are ether. By trading and storing ether, you necessarily take on exposure to the Eth 2.0 project in its entirety.
New stakeholders in governance of Eth 2.0
Governance structures for the two largest cryptos by market cap is also a concern to weigh, Coinbase said.
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“Informal governance led by Bitcoin and Ethereum’s core [blockchain] developers that lead to revisions to the underlying source code or inactions that prevent network scaling, and which evolve over time largely based on self-determined participation … may result in new changes or updates that affect their speed, security, usability or value,” the S-1 states.
It’s well known that Ethereum has a more flexible governance structure than Bitcoin. Being more flexible has some benefits, too, including the ability to respond to threats to the network such as high gas fees.
With Coinbase’s direct listing, it’s necessary to ask where that social pressure will push the Eth 2.0 project. Eth 2.0’s roadmap has adjusted to investor and developer demands in the past, including the early launch of the Beacon Chain in December. Will Coinbase stock holders be more interested in governance of the underlying asset in which Coinbase has a large stake? How will that change the network’s progression?
The Ethereum community has a lot on the line, too. As of Saturday, there are now over 100,000 validators staking 32 ETH on the network. That’s more than $5 billion worth of assets at time of writing locked up for a project that is still very much in the Research and Development phase.
Yet, given a $100 billion valuation, a time may soon come when activist investors, developers and users butt heads on Eth 2.0 on a larger scale. We’ve seen it before among token projects themselves: Hedge fund manager Arca demanded developer house Gnosis change its business model or pay back users. With the public listing, the teams working on Eth 2.0 could face similar scrutiny. In other words, a Coinbase public listing brings a new group of entrants into Ethereum’s governance ecosystem.
Pulse check: Improving validator performance
If you’re 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 get up to speed about jargon and terminology used throughout this article.
Source: CoinDesk Data Dashboard (Data as of 3/2/2021 @ 20:54 UTC)
It’s been two weeks since the CoinDesk validator node, dubbed “Zelda,” was activated on Ethereum 2.0. Since Wednesday, Feb. 17, Zelda has earned 0.10 ETH, worth roughly $150.58 at time of writing. Of the 102,000 active validators on Eth 2.0, Zelda ranks #73,164 by income earned, according to block explorer beaconcha.in.
Daily Income Earned by Zelda (Data as of 3/2/2021 @ 20:54 UTC) (Beacon Chain)
It’s a little disheartening to see Zelda underperform against the large majority of Eth 2.0 validators. After speaking with others who also run their own Eth 2.0 node operations, I’ve learned there are tweaks and adjustments we can try to help improve node performance.
One of them is increasing the number of other peers to which Zelda is connected. Right now, Zelda communicates with about 50 other Eth 2.0 validators. Bumping that number up to 100 or even 150 peers will increase the chances of her receiving and propagating data about the Eth 2.0 network in a timely manner.
Speaking of data, there’s a wealth of information Zelda receives every minute about the consensus of the Ethereum 2.0 network. The one featured below, called the “Finalized Root,” tracks the value of the hash shown as an arbitrary number computed for each block created on the Eth 2.0 network.
Finalized Root (Data as of 3/2/2021 @ 20:54 UTC) Source: CoinDesk Data Dashboard
This metric should always look crazy and random. It represents the cryptography that is securing Ethereum’s proof-of-stake blockchain. Should these values ever appear to have a discernable pattern or trend, there is reason to believe that someone has cracked the mathematical algorithm, also called a “cryptographic hash function,” securing the network.
The finalized root is one of several new metrics CoinDesk is able to track in real time through running our own Ethereum 2.0 validator. Over the next few weeks, I’ll highlight more abstruse metrics from the CoinDesk Data Dashboard that illustrate the health and activity of the Eth 2.0 network.
After all, the main purpose of the Valid Points project and spinning up the Eth 2.0 node in the first place was never really about maximizing our returns on investment. (Although the more we can earn for charity, the better!) The motivation for Zelda has always been to chronicle the development of Eth 2.0’s evolution by running our own hardware and gaining an unvarnished perspective of the network’s live development.
For the full back story of the Valid Points project, be sure to read our CoinDesk article on how this journey got started.
Validated takes
DeFi token SUSHI hits record price high and eyes further gains (Article, CoinDesk)
Funding culture and empowering artists with NFTs (Podcast, CoinDesk)
How Hashmasks are setting the standard for digital art (Article, CoinDesk)
New Ethereum-based derivatives trading platform wins EU’s MIFID license (Article, CoinDesk)
NFTs Aren’t Art? OK, Boomer (Article, CoinDesk)Second Ethereum ETF Filed in Canada (Article, CoinDesk)
Establishing bounds for miner revenue in EIP 1559 (Blog post, Deribit Insights)
F2Pool, Ethereum’s fourth-largest mining pool by hashpower announces support for EIP 1559 upgrade (Blog post, F2Pool)
A primer on the Polkadot network (Blog post, Messari)
Eth 2.0 factoid of the week
Open comms
Feel free to reply any time and email research@coindesk.com with your thoughts, comments or queries about today’s newsletter. Between reads, chat with us on Twitter.
Valid Points incorporates information and data directly from CoinDesk’s own Eth 2.0 validator node in weekly analysis. All profits made from this staking venture will be donated to a charity of our choosing once transfers are enabled on the network. For a full overview of the project, check out our announcement post.
You can verify the activity of the CoinDesk Eth 2.0 validator in real time through our public validator key, which is:
0xad7fef3b2350d220de3ae360c70d7f488926b6117e5f785a8995487c46d323ddad0f574fdcc50eeefec34ed9d2039ecb.
Why has Ethereum been outperforming Bitcoin?
Bitcoin may have pulled back 20% in the last few weeks, but that’s after a nearly five-fold sprint over the past year.
If that’s impressive, it’s not quite as spectacular as Ethereum, which is up over 530% over the last year – even after falling 25% from its recent peak of $1 958. This growth is in part thanks to the explosive rise in decentralised finance (DeFi), a subsector of the cryptocurrency industry where entrepreneurs are building automated trading and lending systems atop blockchain networks that don’t require any intermediaries like banks or brokers.
Bitcoin and Ethereum are the two largest cryptocurrencies in terms of total market cap. But when you dive into the details, you’ll find that these two concepts actually serve completely different purposes.
Main takeaways: Bitcoin vs Ethereum
Bitcoin is a cryptocurrency; Ethereum is a platform.
Bitcoin transactions are primarily monetary; Ethereum transactions may be executable instructions.
Bitcoin is primarily a store of value and medium of exchange; Ethereum is not.
What is Bitcoin?
In January 2009, an enigmatic figure named Satoshi Nakamoto executed an idea that he had laid out in a white paper — a peer-to-peer electronic cash system that could operate securely without a central authority.
With bitcoin, the idea of a cryptocurrency, or money without any physical form, was born.
The primary purpose of bitcoin was to establish itself as a viable alternative to traditional fiat currencies backed by countries.
It is primarily a store of value and a medium of exchange.
What is Ethereum?
Ethereum was launched in 2015 and is more than a cryptocurrency.
Actually, Ethereum is not a cryptocurrency at all — Ether (ETH) is its native currency.
The Ethereum blockchain is powered by ETH, which can be used for several purposes, such as to pay for computational services on the blockchain.
Ethereum is the blockchain that Ether is built on, and many people get the two confused. But you don’t call Ether ‘Ethereum’ just like you don’t call Bitcoin ‘blockchain’.
Ethereum is a programming language and a decentralised software platform. Developers build decentralised apps (dApps) and smart contracts on top of the platform.
As the native currency on the Ethereum platform, Ether is used to power the platform, much like oil is used to power the global transportation networks.
Ethereum has pioneered the concept of a blockchain smart contract platform.
Smart contracts are computer programmes that automatically execute the actions necessary to fulfil an agreement between several parties on the internet. They were designed to reduce the need for trusted intermediates between contractors, thus reducing transaction costs while also increasing transaction reliability.
Comparing the two
Bitcoin accounts for about 72% of the total market cap of all cryptocurrencies, and Ethereum 15%. This is really a two-horse race at the moment, though other digital coins such as Cardano and Binance Coin are fast gaining on the market leaders.
Bitcoin was built to do one thing well — provide a way for people to transfer value from one to another without a banking or payment intermediary. Bitcoin is seen as a store of value and if often referred to as digital gold. There are currently 18.6 million bitcoin in issue, and there will only ever be 21 million of these digital coins. This is one key reason behind bitcoin’s remarkable price rise as an asset over the last decade. Institutional interest in bitcoin is growing, spurred by fears that fiat currencies such as the rand and US dollar are subject to continuous inflation of money supply, which devalues their worth.
The case for Ethereum is somewhat different. Unlike bitcoin, Ethereum does not have a hard cap, meaning the number of coins in issue expands every year (there are currently 114.8 million in issue); however, the ETH annual inflation per year will eventually trend to zero as more coins enter circulation.
Ethereum is built on the idea of a general multi-purpose blockchain. As a result, Ethereum is able to do many things well instead of just serve as a payment system. Ether can be used as a digital currency, but that is not its primary purpose. The Ethereum platform was built primarily to monetise operations of Ethereum smart contracts and dApps.
Ethereum does not intend to be a store of value as is the case with bitcoin, but derives its value from an expanding network that allows transactions between parties that do not have to trust or even know each other.
These transactions are known as “smart contracts”. Think of Ethereum as the iOS or Android operating system on your smartphone that allows applications and games to function. Ethereum is the operating system that will allow a similar explosion of decentralised applications to be developed – such as for lending, investing and earning interest, not to mention purchasing insurance and trading between countries.
So Ethereum is both a currency (called Ether) and a network.
Both Bitcoin and Ethereum are decentralised and so are not run or managed by a central authority. They are both built on distributed ledger blockchain.
There’s really no comparison
Researching Bitcoin vs Ethereum leads to a deeper discussion of what blockchain technology can do to improve every aspect of our lives. If you want to know the future of everything from finance to the judiciary to construction, Bitcoin and Ethereum will likely be a big part of it.
The blockchain that makes Bitcoin and Ethereum possible is the most important idea to understand. No longer do we have to rely on giving others our precious data to make transactions — blockchain gives us the power to create a trustless, immutable way to do business.
Bitcoin will likely remain king of the cryptos for the foreseeable future, but attention is shifting to the investment potential of other cryptocurrencies like Ether as other areas of the cryptocurrency ecosystem develops.
How to invest?
If you are working within an established, reputable crypto investing platform like Revix, you can invest in both bitcoin and Ethereum’s Ether token. Revix was launched to make it easy to invest in cryptos like bitcoin and Ethereum and, through its investment platform, to gain exposure to ready-made baskets of cryptocurrencies that they call ‘Bundles’ for as little as R500. Revix charges no sign-up, monthly account or subscription fees, but rather a simple 1% transaction fee for both buys and sells.
The Top 10 Bundle available through Revix spreads your investment equally over the 10 largest cryptocurrencies – which covers about 85% of the crypto market when measured by market capitalisation – with each having a 10% weighting. By default, you are buying the ten biggest success stories in the crypto space. The weightings are adjusted monthly to ensure no crypto exceeds a 10% weighting, and that can be a major advantage as other constituents of the bundle (like Ether, Chainlink, Cardano and Polkadot) have outperformed bitcoin’s amazing 300%-plus rise last year.
The Smart Contract Bundle tracks those cryptocurrencies that enable smart contract functionality and include several cryptocurrencies that are looking to challenge Ethereum’s smart contract dominance. Smart contracts use the blockchain to allow peer-to-peer transactions without the need for third party verification. This bundle comprises cryptocurrencies that enable developers to build applications on top of their blockchains, much like how developers build mobile apps on top of the Apple mobile iOS operating system. The cryptos in this bundle include Ethereum, Cardano, Tron, Neo, and EOS.
Revix also offers a Payment Bundle, which provides exposure to the largest five payment-focused cryptocurrencies looking to compete with government-issued fiat currencies to make digital payments cheaper, faster and more global. These cryptos include bitcoin (BTC), Ripple (XRP), Litecoin (LTC), Bitcoin Cash (BCH) and Stellar (XLM).
You can also buy and sell USDC (a ‘stablecoin’ fully-backed by the US dollar) and a physical gold-backed token called PAX gold which provides legal ownership of an ounce of gold through Revix’s online platform.
Brought to you by Revix.
For more information, visit Revix.
This article is intended for informational purposes only. The views expressed are not and should not be construed as investment advice or recommendations. This article is not an offer, nor the solicitation of an offer, to buy or sell any of the assets or securities mentioned herein. You should not invest more than you can afford to lose, and before investing please take into consideration your level of experience and investment objectives, and seek independent financial advice if necessary.
Bitcoin (BTC/USD), Ethereum (ETH/USD) Rallying Sharply as the Bulls Wrestle Back Control
Bitcoin (BTC/USD) and Ethereum (ETH/USD) Price, Analysis and Chart:
Bitcoin (BTC/ USD ) back above $51,000 and pushing higher.
Ethereum (ETH/USD) bounces off support, back above $1,600.
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A sea of green in the cryptocurrency space with some coins recording early double-digit gains. Last week’s sell-off has been absorbed and the technical picture for both Bitcoin and Ethereum now looks increasingly positive. As always with the cryptocurrency, the real reason for the move is never immediately clear although a few recent actions are likely to be put forward as drivers of the recent move. A recent tweet by the CEO of a South Korean crypto-analytics firm that the large Bitcoin trades recently indicate OTC-buying by cryptocurrency ‘whales’ will have buoyed the bulls, while Goldman Sachs is said to be firing up its cryptocurrency trading desk again and will begin trading bitcoin futures and non-deliverable forwards. In addition, cryptocurrency miner, publicly-quoted Argo Blockchain, today said that it will pay its CEO in Bitcoin and allow other employees to be in Bitcoin if they wish.
While in isolation these events may not spark a strong move, in combination they continue to point to increased adoption and interest in the space, a space that needs little news to spark a strong move. Emotion is a strong driver in the cryptocurrency market and if the recent move has taken out selling interest, then a fresh move higher looks the path of least resistance.
How to Manage the Emotions of Trading
A look at the daily charts suggests that the recent sell-off is being pared back and if BTC/USD can regain its bullish channel, fresh all-time highs are likely.The CCI reading shows Bitcoin landed in oversold territory recently for the first time since late-January, with the previous oversold reading back in September 2020 when BTC traded around $10,000. It looks as though oversold signals have been drivers of strong rallies. The bullish channel is steep and BTC/USD will likely have to make a fresh all-time high to regain it.
Bitcoin (BTC/USD) Daily Price Chart (August 2020 – March 3, 2021)
Ethereum (ETH/USD) continues its pullback from the late-February sell-off and is looking to re-test $1,700 and potentially higher. Again the CCI indicator highlighted heavily oversold conditions, while the 50-day simple moving average helped to stem the sell-off and if closed and opened above will turn into stronger support. The next area of resistance lies between $1,700 and $1,780 before the February 20 high of $2,036 comes into play.
Ethereum (ETH/USD) Daily Price Chart (August 2020 – March 3, 2021)
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What are your views on Bitcoin (BTC) and Ethereum (ETH) – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.