Valid Points: Ethereum’s Proof-of-Stake May Happen Sooner Than You Think

Valid Points: Ethereum’s Proof-of-Stake May Happen Sooner Than You Think

Eth 2.0 may be coming to a computer screen near you quicker than most anticipated, including the Ethereum developers.

Last week, Vitalik Buterin released a “quick merge via fork choice change” document – a lighter version of the Executable Beacon Chain for quick deployment. While only a loose technical document, the plan ostensibly serves as a notice against any further agitation from Ethereum miners as the merge would allow Ethereum to abandon mining in a rapid fashion.

The Executable Beacon Chain is a proposal to attach Eth 1.x – which we will now refer to as Ethpow (proof-of-work Ethereum) – onto the currently running proof-of-stake Ethereum: the Beacon Chain.

Related: Bitcoin Is Not a Stock

The proposal works by having slightly altered Ethereum software, like Geth or OpenEthereum, point its transaction flow at the Beacon Chain. Instead of miners packaging transactions into blocks, the Beacon Chain’s validators will verify and finalize transactions.

“The only change required on the ethpow side is that the client must have a communication channel with a trusted beacon node and must change its fork choice rule,” Buterin writes.

Why the rush?

A quickened transition schedule is being considered for a few reasons. One recent consideration has been rising tensions between mining parties and Ethereum developers as EIP 1559 and PoS come into focus. The former proposal is highly contested by mining parties, but has achieved enough support among developers to be included in July’s London hard fork. PoS, of course, would see mining done away with completely.

Developers, however, have the high ground in this fight. A quick merge to PoS would only require “at least one honest miner” in order to start the merge. Multiple honest mining parties pointing blocks to the Beacon Chain would entail a smooth transition, Buterin says.

Related: Bitcoin Volatility Index ‘BitVol’ Makes First Trade

Story continues

A quick transition to PoS does preclude the inclusion of multiple highly touted Ethereum tech stacks, at least for the moment.

Yet, at the end of the day a transition to PoS remains the goal of Ethereum developers, as it has been since before Ethpow launched. Any transition to PoS where Ethereum doesn’t lose its top dog position as the go-to platform for decentralized apps would likely be considered a victory.

Pulse check: Validator efficiencies

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 terminology used throughout this newsletter.

CoinDesk’s Eth 2.0 validator node, Zelda, is humming along perfectly, earning roughly 0.0073 ETH or $13.12 per day.

While the amount of reward earned by our Eth 2.0 validator has not changed significantly over the past few weeks, I did notice a spike in Zelda’s computer processing power and a subsequent drop in her memory usage.

According to CoinDesk’s data dashboard, Zelda’s central processing unit (CPU) usage almost doubled from around 100% to 200% on Friday, March 12, and has stayed at these heightened levels ever since.

This suggests that Zelda is consuming more electrical energy in order to perform the same tasks it did before. For context, Zelda has four CPUs it can max out before validator operations are negatively impacted. Operating at a level of 200% suggests we’re using the max computing power of two out of four CPUs.

At the same time, Zelda’s usage of random access memory (RAM), which is the component of a computer that is reserved for temporary data storage, has gone down from around 4 GB to rough 2.5 GB.

This suggests the memory capacity needed for running this Eth 2.0 validator has dropped. Zelda has up to 16GB of RAM, enough for an average desktop computer to run various applications and demanding games. For Eth 2.0 validating, we use roughly 15% of total RAM, enough for tablet devices to use.

Ethereum validator rewards vs. mining rewards

It’s important to note that under a proof-of-work (PoW) consensus protocol, whereby transactions and blocks are finalized through the process of mining, the aim would be to consistently max out a computer’s processing power and optimize all unused components of hardware for increasing the probability of earning network rewards.

Under Ethereum’s proof-of-stake (PoS) consensus protocol, there’s no need to do either of these things. Despite operating below its computational capacity, Zelda still maintains an effectiveness of 100%, according to beaconcha.in. This is because, unlike mining, staking isn’t about competing for rewards against other validators through greater hashpower.

All validators who keep their operations up and running are rewarded on a consistent and regular basis in the form of interest on their stake. The only way to substantially increase the amount of rewards earned on the network is to stake more wealth in 32 ETH increments. (More on the reward dynamics of Eth 2.0 validators versus Ethereum miners here.)

The Eth 2.0 network does not reward aggressive increases in computing power nor sneaky optimizations to hardware. If anything, developers of the protocol are working hard to find ways in which the computational burden of being a validator can be reduced even further and updated so that even a mobile device could one day be sufficient for securing the network.

Going back to the mysterious changes in CPU usage and RAM, it turns out a code update was released by CoinDesk Director of Engineering Spencer Beggs last Friday in preparation for Ethereum’s upcoming system-wide upgrade dubbed “Berlin.”

As an Eth 2.0 validator, Zelda’s responsibilities can only be performed by connecting to both Ethereum’s PoW and PoS networks. The upcoming upgrade to Ethereum’s PoW network required Beggs to update part of our software, which likely triggered these changes in our energy consumption and memory usage.

This code update is mandatory for all Eth 2.0 validators and must be implemented by April 14, 2021, at the latest. If you’re a validator and haven’t yet made the upgrade, you can download and install the latest software releases for Berlin here.

Validated takes

Editorial on getting Ethereum to proof-of-stake as soon as humanly possible (Blog post, Ben Edgington)

Associated Press NFT artwork sells for $180,000 in ETH (Article, CoinDesk)

Bitcoin, baseball and new drama in the Ethereum 2.0 timeline (Video, CoinDesk)

DeFi lending protocolAlchemix raises $4.9 million in round led by CMS and Alameda (Article, CoinDesk)

How to create, buy and sell NFTs (Article, CoinDesk)

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.

Related Stories

Latest Ethereum price and analysis (ETH to USD)

Ethereum is currently trading at $1,770 following a 8.9% move to the downside since Sunday’s high of $1,939.

The world’s second largest cryptocurrency by market cap has managed to find a natural level of support on the daily 21 exponential moving average.

A daily close below that level, which is sitting at $1,733, would indicate a period of continuation to the downside, with price targets emerging at $1,639 and $1,450.

However, a bounce from this region would form a crucial higher low from the sell-off in late February, which could trigger a notable bounce back into the $1,800 to $1,850 range.

ETHUSD chart by TradingView

Much of Ethereum’s price action is dictated by Bitcoin, which in itself has struggled this week after forming a new all-time high above $61,000 over the weekend.

Typically, when Bitcoin makes a major move in either direction, altcoins like Ethereum suffer as traders naturally liquidate more speculative assets into stablecoins.

If Bitcoin can begin to consolidate in the $55,000 to $57,000 range, Ethereum will likely experience a relief rally to $1,850.

For more news, guides and cryptocurrency analysis, click here.

About Ethereum

Ethereum was launched by Vitalik Buterin on July 30 2015. He was a researcher and programmer working on Bitcoin Magazine and he initially wrote a whitepaper in 2013 describing Ethereum.

Buterin had proposed that Bitcoin needed a scripting language. He decided to develop a new platform with a more general scripting language when he couldn’t get buy-in to his proposal.

More Ethereum news and information

If you want to find out more information about Ethereum or cryptocurrencies in general, then use the search box at the top of this page. Please check the below article:

https://coinrivet.com/ethereum-adopts-erc-1155-as-an-official-standard/

As with any investment, it pays to do some homework before you part with your money. The prices of cryptocurrencies are volatile and go up and down quickly. This page is not recommending a particular currency or whether you should invest or not.

You may be interested in our range of cryptocurrency guides along with the latest cryptocurrency news.

Disclaimer: This is not financial advice.

Ethereum, Litecoin, and Ripple’s XRP – Daily Tech Analysis – March 17th, 2021

Ethereum

Ethereum rose by 0.67% on Tuesday. Following a 2.89% decline on Monday, Ethereum ended the day at $1,806.03.

A bearish start to the day saw Ethereum slide to an early morning intraday low $1,706.25 before making a move.

Ethereum fell through the first major support level at $1,722.04 before striking a late morning intraday high $1,819.20.

Falling short of the first major resistance level at $1,881, Ethereum fell back to $1,760 levels before funding support.

A late move back through to $1,800 delivered the upside for the day.

At the time of writing, Ethereum was down by 0.37% to $1,799.27. A mixed start to the day saw Ethereum rise to an early morning high $1,812.76 before falling to a low $1,798.32.

Ethereum left the major support and resistance levels untested early on.

For the day ahead

Ethereum would need to avoid a fall through the pivot level at $1,777 to support a run at the first major resistance level at $1,848.

Support from the broader market would be needed, however, for Ethereum to break out from Tuesday’s high $1,819.2.

Barring an extended crypto rally, the first major resistance level and resistance at $1,850 would likely cap any upside.

In the event of a breakout, Ethereum could test resistance at $1,950 before any pullback. The second major resistance level sits at $1,890.

Failure to avoid a fall through the $1,777 pivot would bring the first major support level at $1,735 into play.

Barring an extended sell-off, however, Ethereum should steer clear of sub-$1,650 levels. The second major support level at $1,664 should limit the downside.

Looking at the Technical Indicators

First Major Support Level: $1,735

Pivot Level: $1,777

First Major Resistance Level: $1,848

23.6% FIB Retracement Level: $1,579

38.2% FIB Retracement Level: $1,292

62% FIB Retracement Level: $830

Litecoin

Litecoin rose by 0.49% on Tuesday. Following a 6.17% slide from Monday, Litecoin ended the day at $201.64.

A bearish start to the day saw Litecoin saw Litecoin fall to an early morning intraday low $191.18.

Story continues

The sell-off saw Litecoin fall through the 23.6% FIB of $195 and the first major support level at $192.

Steering clear of sub-$190, Litecoin struck a late morning intraday high $205.27 before falling back to $195 levels.

Finding support at the 23.6% FIB, Litecoin moved back through to $201 levels to end the day in the green.

At the time of writing, Litecoin was down by 0.29% to $201.05. A mixed start to the day saw Litecoin rise to an early morning high $202.83 before falling to a low $201.00.

Litecoin left the major support and resistance levels untested early on.

For the day ahead

Litecoin would need to avoid a fall through the $199 pivot level to support a run at the first major resistance level at $208.

Support from the broader market would be needed, however, for Litecoin to break out from Tuesday’s high $205.27.

Barring an extended crypto rally, the first major resistance level and Tuesday’s high would likely cap any upside.

In the event of an extended rally, Litecoin could test resistance at $215 before any pullback. The second major resistance level sits at $214.

Failure to avoid a fall through the $199 pivot level would bring the 23.6% FIB of $195 and the first major support level at $194 into play.

Barring an extended sell-off, Litecoin should steer clear of sub-$185 support levels. The second major support level at $185 should limit the downside.

Looking at the Technical Indicators

First Major Support Level: $194

Pivot Level: $199

First Major Resistance Level: $208

23.6% FIB Retracement Level: $195

38.2% FIB Retracement Level: $163

62% FIB Retracement Level: $110

Ripple’s XRP

Ripple’s XRP rallied by 5.48% on Tuesday. Reversing a 0.79% fall from Monday, Ripple’s XRP ended the day at $0.45984.

A mixed start saw Ripple’s XRP fall to an early morning intraday low $0.42736 before making a move.

Steering clear of the first major support level at $0.4232, Ripple’s XRP rallied to a mid-morning intraday high $0.53116.

Ripple’s XRP broke through the day’s major resistance levels and the 38.2% FIB of $0.4632.

Coming up against the 23.6% FIB of $0.5320, Ripple’s XRP slid back to $0.447 levels before wrapping up the day at $0.4598 levels.

Ripple’s XRP fell back through the major resistance levels and the 38.2% FIB.

The late move back through to $0.46 levels, however, saw Ripple’s XRP break back through the first major resistance level at $0.4481 and the second major resistance level at $0.4605 before easing back.

Late in the day, the 38.2% FIB of $0.4632 pinned Ripple’s XRP back.

At the time of writing, Ripple’s XRP was up by 0.37% to $0.46156. A mixed start to the day saw Ripple’s XRP fall to an early morning low $0.46061 before rising to a high $0.46357.

While Ripple’s XRP left the major support and resistance levels untested, the 38.2% FIB of $0.4632 pinned Ripple’s XRP back.

For the day ahead

Ripple’s XRP will need to move through the $0.4728 pivot level to bring the first major resistance level at $0.5182 into play.

Support from the broader market would be needed, however, for Ripple’s XRP to break back through to $0.50 levels.

Barring an extended crypto rally, the first major resistance level would cap any upside.

In the event of an extended rally, Ripple’s XRP could test resistance at the 62% FIB of $0.5320. The second major resistance level sits at $0.5766.

Failure to move through the $0.4728 pivot would bring the first major support level at $0.4144 into play.

Barring another extended sell-off, however, Ripple’s XRP should steer clear of sub-$0.40 levels. The second major support level sits at $0.3690.

Looking at the Technical Indicators

First Major Support Level: $0.4144

Pivot Level: $0.4728

First Major resistance Level: $0.5182

23.6% FIB Retracement Level: $0.5320

38.2% FIB Retracement Level: $0.4632

62% FIB Retracement Level: $0.3521

Please let us know what you think in the comments below.

Thanks, Bob

This article was originally posted on FX Empire

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