Neo launches N3 amid high Ethereum gas fees · TechNode
Neo, an Ethereum alternative and one of China’s oldest blockchain protocols, is starting to roll out a third version of its public blockchain infrastructure, dubbed N3.
Why it matters: N3 is a make-it-or-break-it moment for one of China’s most promising and globally recognized blockchain projects. The team has been working on the update for years. On paper, N3 hits all the right notes for becoming a widely used blockchain protocol. But it will need to stand out from an increasingly competitive crowd.
The upgrade comes at an opportune time: The Ethereum network is facing critical capacity challenges, meanwhile the Chinese government highlighted blockchain as a strategically important technology in the latest Five-Year Plan.
Founded in 2013, Neo is one of many Ethereum alternatives looking to attract developers to build decentralized applications on its blockchain.
Details: The original planned launch date for Neo’s third iteration was in 2020, but it was pushed back to Q1 2021 because the system wasn’t ready, Da Hongfei, co-founder of Neo, told TechNode. It is difficult to predict a specific time for a community-driven project, Da said. Like most public blockchains, the code was developed by a small team of core developers and a wider global developer community.
N3 will increase transaction speed on the network from 1,000 per second to 5,000 and reduce transaction charges, known as “gas fees,” by 100 times, according to a Neo press release emailed to TechNode.
Cheap gas is strategically important to compete with the Ethereum network, whose rocketing transaction fees have sent developers looking for greener pastures.
The new version of the chain will also include oracle integration, a decentralized file storage solution similar to Filecoin’s IPFS, and a new governance mechanism.
Oracles like Chainlink and decentralized storage like Filecoin are relatively new, viable blockchain features. When Chainlink and Filecoin broke out with their solutions in 2020, their coin prices soared. Just like a car needs gasoline to run, the Ethereum virtual machine needs gas. Gas fees are essentially transaction fees that users pay to miners to include their transactions in blocks, which make up the ever-growing blockchain ledger. Ethereum miners can pick which transactions to execute, so the higher the demand for execution—reflecting an increase in the number of people wanting to use the network—the higher the gas fees.
Neo’s focus is digital assets, so the co-founder said the community is “encouraged” to build fundamental infrastructure for decentralized finance, such as landing and swap protocols.
Oracles are key to DeFi because they connect the real world to blockchains. Da also sees N3 as a good place to build non-fungible tokens (NFTs), due to the decentralized file storage feature.
Da said that because developers were waiting for the network upgrade, they hadn’t been building many dapps on Neo.
Migration: The migration of Neo tokens to the new network will take place using a consortium interoperability protocol Poly Network developed by the team behind Neo.
Exchanges and wallets take care of token migration, the process by which old tokens are converted into new tokens on the new chain, using smart contracts.
Radical changes to the blockchain protocol such as the ones N3 will implement usually take place through a so-called hardfork: The chain splits in two parts, and the change is implemented in one.
Instead of a hardfork, Neo will use an interoperability protocol, a type of chain that enables the transfer of information from one blockchain to another, to create a completely new chain.
“We will be the first blockchain in the world to do a completely new chain through an interoperability protocol,” Da said.
These protocols are at the frontier of blockchain development and crucial for mass adoption: They promise to connect chains that currently exist as islands to create an internet of blockchains.
The N3 migration will test whether Poly Network can be used to create a blockchain from scratch and correctly transfer all the data from the existing chain.
The Ethereum challenges: The Ethereum network has been facing significant challenges in the last few months, and developers are scrambling to find alternatives for their dapps. Gas fees have been hitting record highs as the network becomes congested.
Da Hongfei, Neo’s co-founder (Image credit: Neo) Ethereum “has reached its maximum capacity,” Da said. Transactions per day have plateaued at around 1.2 million to 1.3 million since August, while alternatives like Binance Smart Chain are reaching record-high transaction volumes.
The update to Ethereum 2.0 would likely solve some of these problems, but has been continuously put off. Da thinks we won’t be seeing it for a few years: “It’s difficult to deal with different interest groups,” particularly miners, he said. The upgrade will hurt their bottom line by drastically changing how they are rewarded.
“At the end of the day, Ethereum is one blockhain but everyone needs to maintain a ledger. The capacity growth of the Ethereum ledger will not outpace the growth of demand,” so there is room for many different protocols to grow, Da said.
Government tailwinds: Blockchain’s inclusion in the 2021-2025 Five-Year Plan will “definitely” bring more investment to the technology, Da said.
Ethereum scaling solution Optimism delays its mainnet launch at least until July
Ethereum Layer 2 scaling solution Optimism has delayed the public launch of its mainnet.
The mainnet was scheduled to roll out this week, but it has now been postponed at least until July. The new schedule is just a rough estimate, said Optimism, because the launch is a “collaborative effort” of the Ethereum community.
“Opening mainnet to the public is not something we can do alone,” said Optimism. “It will be a collaborative effort between us, projects, and core infrastructure providers like oracles, wallets, nodes & explorers.”
So when the ecosystem is ready and there is stability, Optimism will launch its mainnet to the public.
Optimism has been building an Optimistic Rollup-based Ethereum scaling solution since June 2019. The solution aims to increase Ethereum’s throughput (the number of transactions processed per second) and reduce its gas fees.
Earlier this year, Optimism “soft launched” its solution — the Optimistic Virtual Machine (OVM) — with decentralized exchange Synthetix. That means Synthetix will integrate the solution in four phases to limit risk to its platform.
Optimism said Synthetix users have already been enjoying speed and cost savings. Around $10 million have been saved on fees across more than 100,000 transactions, said Optimism.
Another major decentralized protocol set to integrate with Optimism is Uniswap. Earlier this week, Uniswap said it targets an L1 Ethereum mainnet launch of its version 3 (V3) on May 5, and an L2 deployment on Optimism will follow “shortly after.”
Optimism, formerly known as Plasma Group, has pioneered Optimistic Rollups. A rollup provides scaling by bundling or rolling up transactions into a single transaction. With rollups, a transaction is received on the main Ethereum blockchain, but it is executed on a Layer 2 solution, and the execution data is then sent back to Ethereum. Since computation is done off-chain, it reduces Ethereum’s load but maintains its security.
Another variant of rollups is ZK-Rollups. Both Optimistic Rollups and ZK-Rollups have their pros and cons, but the main difference between the two is that the former uses fraud proofs, and the latter uses validity proofs. Thus, with Optimistic Rollups, a transaction can be challenged, but not with ZK-Rollups. With ZK-Rollups, transactions are valid by design.
Ethereum creator Vitalik Buterin recently said rollups are a “powerful” solution for Ethereum scaling in the “short and medium-term future (and possibly long-term as well).” But they are still an early-stage technology, Buterin said, suggesting that more work needs to be done in the years to come.
StarkWare and Hermez are two of several projects that have built ZK-Rollups-based scaling solutions. StarkWare’s clients include dYdX and DeversiFi, and Hermez’s clients include Tether and others.
Ethereum Price Prediction: ETH struggles to establish clear trend
Ethereum price is nearing the lower trend line of a massive ascending parallel channel.
Although a bounce seems likely and logical, ETH might not witness this move due to stacked resistance barriers ahead.
A breakdown of the support level at $1,513 will indicate the start of a downtrend.
Ethereum price is treading dangerously close to the lower boundary of a technical formation. A breakout from this level could spell disaster for ETH.
Ethereum price at make-or-break point
Ethereum price has traded within the confines of an ascending parallel channel for over two months. Within this period, ETH created two higher highs and four higher lows.
Although a breakout from the lower trend line of the setup is bearish, ETH bulls seem to have defended the latest retest. Now, a bounce seems likely for the smart contracts platform token.
If the bull rally continues, Ethereum price could see a 55% upswing toward the 127.2% Fibonacci extension level at $2,500. However, this upswing will be anything but manageable due to the multitude of supply barriers present between the current price and the target.
To confirm a solid bullish momentum, a decisive close above $1,744 coinciding with the 78.6% Fibonacci retracement level and the Momentum Reversal Indicator’s State Trend Resistance at $1,818 is necessary.
A successful and sustained climb above these levels suggests that Ethereum price is ready for the next leg up.
ETH/USD 12-hour chart
Adding credibility to this upswing is the stark decrease in the number of daily active deposits. A 21% decrease in this metric suggests that investors are done booking profits, at least for now. Hence, this a bullish development for Ethereum price.
Meanwhile, the number of daily active addresses has not seen a massive change. Despite the recent 20% crash, the number of users interacting with the ETH blockchain remains the same, which can be viewed as a bullish sign.
Ethereum Daily Active Addresses and Daily Active Deposit chart
Regardless of the bullish outlook, IntoTheBlock’s In/Out of the Money Around Price (IOMAP) model paints a rather bearish picture for Ethereum price.
The resistance levels are stacked on top of each other, from $1,640 to $1,784. In fact, 1.2 million addresses that previously purchased $13.25 million ETH are “Out of the Money.” Therefore, ETH price needs to break past the initial set of resistance zones and then face a cluster of underwater investors to have any chances of surging higher.
Failing to do so will add to the already grim scenario and kickstart a descent.
Ethereum IOMAP chart
To conclude, the Ethereum price seems to be facing Insurmountable odds and could slide 10% lower to $1,360 if the crucial support level at $1,510 is breached.