Ethereum Takes a Big Risk–and a Big Step Forward

Ethereum Takes a Big Risk–and a Big Step Forward– by Going Green

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Ethereum–the biggest presence in cryptocurrency behind Bitcoin— has announced it will be cleaning up its carbon footprint and going green. Ethereum is a decentralized, open source blockchain that uses the token Ether for transactions on its platform. The Ethereum blockchain also gives software developers the ability to create dApps–applications that can range from entertainment to business– and disseminate them to interested users.

Despite the celebrated innovations and widespread popularity of Ethereum, Bitcoin, and other cryptocurrencies, these technologies come with a devastating downside: mining these digital currencies deals a huge blow to the environment. The ecological impact of crypto even caused Tesla CEO Elon Musk to ban Bitcoin as a form of payment. He has since publicly considered lifting this ban if tokens were able to transition to clean energy.

In a study titled “The True Costs of Digital Currencies: Exploring Impact Beyond Energy Use,” researchers found that Bitcoin mining alone requires as much energy as all of the data centers on Earth combined. The preeminent cryptocurrency also has a carbon footprint that matches the city of London. The authors of the study concluded that Bitcoin is responsible for 90.2 million metric tons of carbon gases per year.

Ethereum is no less excessive in its energy use. According to estimates, the blockchain platform consumes as much electricity as the African country of Libya. This energy use was exacerbated by the rise of NFTs (Non-Fungible Tokens), one-of-a-kind digital artworks whose property rights are sold for ETH in exchange for a certification of ownership. NFTs are created and published on Ethereum’s own blockchain.

Ethereum hopes to change the face of crypto by going green with “The Merge”

But all that might be behind Ethereum as the second highest market capitalization in cryptocurrency prepares to turn a new corner it calls “The Merge.” The Merge is Ethereum’s plan to slash its energy consumption dramatically by 2022. The plan involves an upgrade that will reduce the Ethereum network’s energy use by over 99%– firmly establishing Ethereum as the most powerful green option in crypto.

The energy cut will mainly be the product of a new form of validating transactions on the blockchain called “proof of stake.” Proof of stake will do away with the energy-draining process of cryptocurrency mining and introduce staking in its place. New transactions on Ethereum’s blockchain will be approved by “validators” who put up a stake on behalf of the transaction:

“Ethereum’s new model will rely on a network of “validators,” people or groups that put up a stake of at least 32 Ether coins (equivalent to nearly $72,000 as of late July). An algorithm will semi-randomly select who gets to create new blocks in the chain; validators who stake more than the minimum 32 Ether increase their odds of winning—sort of like buying more raffle tickets” explains Adam Bluestein, reporting for Fortune.

This ecologically friendly reinvention could attract a whole new audience to Ethereum’s Blockchain platform, but it also poses the risk of alienating its longstanding users. The Merge will do away with the process of mining, a crucial part of the blockchain’s process that miners profited directly off of in the form of transaction fees. The loss of these transaction fees could cause upset miners to abandon Ethereum altogether.

Ethereum supply shock: Exchange ETH reserves continue to fall after a 26% drop in 2021

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The amount of Ether (ETH) held by all cryptocurrency exchanges has declined dramatically in the previous 12 months.

Blockchain analytics firm CryptoQuant reported that Ethereum reserves on trading platforms dropped 26.29 million ETH to 19.22 million ETH year-on-year (YoY), indicating that traders' preference to hold their tokens increased.

At least the Ether price performance in the same period indicates the same. Between August 25, 2020, and press time, the ETH/USD exchange rate exploded by a little over 730%— from $407 to $3,190, signaling an erratic inverse correlation between the Ethereum token prices and its reserves across all exchanges.

Ethereum reserves versus ETH/USD price performance YoY. Source: CryptoQuant

In detail, traders typically prefer to keep their crypto assets on exchange wallets when they wish to trade them in the near term. Otherwise, they move those assets to private wallets to control their own keys, a strategy that stems from the fears of losing funds to hacks and similar security breaches at crypto exchanges.

Ether deposits plunge

Another on-chain indicator, built by CoinMetrics to track the total number of Ether deposits to exchanges, also alerted holding sentiment among Ethereum traders. It noted that traders' ETH deposits across all the trading platforms had plunged 21.11% YoY, from 413,772 ETH to 326,408.

Ethereum deposits on exchanges. Source: CoinMetrics, Messari

But in the last 30 days, the ETH deposits have dropped dramatically by 47.81%, signaling that many investors are expecting higher prices in the long term.

Meanwhile, the sum count of unique addresses holding any amount of Ether in the last 30 days has jumped 1.67%, coinciding with a 42% ETH/USD rally in the same period. On a YoY timeframe, the unique address count has jumped 30.87%.

Ethereum address count. Source: CoinMetrics, Messari

Supply Squeeze

The Ether holding sentiment has picked momentum in days leading up to and after a landmark Ethereum network upgrade on August 5, 2021. Dubbed as the London Hard Fork, the software update implemented a proposal called EIP-1559 that enabled gas fee burning on the Ethereum network.

This has added deflationary pressure as a result. In the first 20 days after EIP-1559 went live, the network has burned almost 92,595 ETH worth around $295.85 million, according to WatchTheBurn.com.

Related: Ethereum ‘liquidity crisis’ could see new ETH all-time high before Bitcoin — Analyst

More Ether went out of active supply as Ethereum invited participants to deposit 32 ETH to become validator on its upcoming proof-of-stake blockchain. Beacon Chain reports that the so-called Ethereum 2.0 smart contract has attracted a little over 6.9 million ETH worth around $22 billion.

Staked Ether in Ethereum 2.0 smart contract. Source: BeconCha.in

Additionally, demand for Ether continues to grow owing to Ethereum’s expanding ecosystem, containing projects from the booming decentralized finance (DeFi) and nonfungible token sectors.

Last week, Lyn Alden, the founder Lyn Alden Investment Strategy, called the London upgrade a “tactically bullish” event, noting that it could easily push ETH/USD rates to over $5,000.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

Whales Abruptly Shuffle $500,000,000 in Ethereum Amid Crypto Market Pullback

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Whales are moving massive amounts of Ethereum (ETH) as volatility in the crypto markets picks up.

Large holders of the second-biggest crypto asset moved more than $500 million in ETH across 13 separate transactions on Tuesday and Wednesday.

Among the largest single Ethereum whale transactions is a transfer of 28,272 ETH, worth more than $90.8 million. The crypto was sent from one unidentified wallet to another, according to the crypto tracker Whale Alert. Two minutes later, the same sending wallet sent another 28,272 ETH to a third unknown wallet.

A similar sequence of events happened when a wallet sent 27,425 ETH worth more than $88.1 million to an unknown wallet. The sending address then sent roughly the same amount to another unknown wallet in a second transaction.

Additionally, the crypto exchange Kraken fired off seven separate ETH transactions to one unknown wallet over a two-minute period on Wednesday. Kraken sent exactly 3,200 ETH worth more than $10.2 million each time, for a total of 22,400 ETH worth more than $71 million.

Other notable transactions include the exchange Gemini sending 10,000 ETH worth more than $32 million to the exchange Binance, as well as the exchange Bithumb sending 12,000 ETH worth nearly $38.6 million to an unknown address.

After reaching a recent high of $3,346.21 on Monday, ETH is now trading at $3,148.80 at time of writing, according to CoinGecko.

The second-biggest crypto asset by market cap is up 3.6% on the week and 41.1% on the month.

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