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The cryptocurrency ether runs on the Ethereum network. Dado Ruvic/Reuters

Ethereum developers have defended the changes to the network that will come in the summer.

They said the alterations are very popular with users, as they make fees simpler and limit ether supply.

But miners remain disgruntled that their fees will be cut, with debate in the community ongoing.

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Developers on the Ethereum network have defended major changes that are set for the summer that will destroy ether tokens and cut the fees paid to miners, saying they’re popular with users and could boost the cryptocurrency’s price.

The planned alteration to the network, known in crypto jargon as EIP-1559, “is very popular among Ethereum users as it potentially makes Ethereum a deflationary asset,” Ben Edgington, a developer at ConsenSys, a company closely involved in the network, said on Tuesday.

Ethereum developers approved significant changes to the network that runs the ether cryptocurrency earlier in March. They are set to overhaul the current system under which users send tokens to miners to pay for transactions to be completed in a kind of auction process.

The changes have sparked anger among miners, however, as they would reduce the fees they receive. Some have even proposed a form of strike.

Yet developers say users support the changes, partly because the reduction in coins could lead to the price of ether rising sharply. Ether traded at around $1,800 on Wednesday. The token has gained around 145% so far this year.

Dan Finlay, lead developer on popular Ethereum wallet MetaMask, said: “Its purpose is to provide a more predictable transaction pricing system that reduces overpayment, and has some deflationary economics as a side benefit.”

Under the changes, which will likely come into force in July, users will send a base transaction fee to the network that would then destroy or “burn” ether tokens, thereby reducing the number of coins in circulation.

It will move the system away from the current mechanism, in which users have to bid to have their transactions included in blocks by miners, which can make fees very costly at times.

Edgington said these issues are “a significant problem for the usability of Ethereum and a barrier to the broader adoption of Ethereum by non-specialists.”

Lex Sokolin, co-head of fintech at ConsenSys, said the changes will take the network fees “from having an unpredictable and unbounded pricing mechanism to something that is much more predictable.”

The anonymous founder of Pylon, a major North American ether miner, said there was a lot of “turmoil” in the Ethereum world. They said miners had spent time and money building facilities, and now could be faced with heavy losses due to the changes.

“It goes back to the point [that] developers don’t mine, so they could care less about a miner, and miners don’t develop, so they could care less about reducing the congestion,” they said.

Some ether miners threatened to effectively go on strike, or try to disrupt the system in other ways in protest at the changes.

But there are signs of peace breaking out, with miners proposing their own EIP - which stands for Ethereum improvement proposal - that would raise their rewards and gradually lower them.

3 Reasons Ethereum Is About to Skyrocket

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Arrowings ascending on a chalkboard

While Bitcoin gets all the attention, its peer has had a much better run over the past year. Ethereum’s value has surged 1,272% since March 2020. Meanwhile, Bitcoin is up only 806% over the same period.

This year, Bitcoin’s smaller rival could widen the gap in performance. Three emerging trends could push the value of Ethereum much higher, which is why investors should watch the lesser-known crypto.

Visa adoption

Yesterday, payments juggernaut Visa announced it would start settling transactions in cryptocurrency. The company has partnered with Crypto.com to pilot a settlement layer based on the Ethereum network.

With over 200 markets and compatibility with 160 currencies, the global Visa network is the largest payment platform in the world. The company processes 65,000 transaction messages every second. If the pilot project is successful, many of those transactions could be shifted to the Ethereum network.

As usage expands, the value of the underlying ETH is likely to skyrocket. However, payments are just one of the many ways this blockchain could be useful. Over the past year, Ethereum has seen immense adoption in another sector of the economy — digital art.

NFTs

Non-fungible tokens (NFTs) are based on the Ethereum network. These are easy-to-create digital pieces of art that can be stored, bought, or sold like digital collectibles. Think of trading cards, limited edition books or exclusive soundtracks that live on the blockchain.

In 2020, the National Basketball Association adopted the technology to create TopShots — a marketplace to buy and trade moments from live games. Imagine buying an NFT video of Michael Jordan’s first slam dunk and seeing the value of your collectible appreciate as Jordan became a superstar.

My example isn’t perfect because I’m not into sports, but you get the idea. NFTs are already starting to gain mainstream adoption. If this continues, the Ethereum network could be the bedrock of an entirely new industry worth several billions of dollars.

Story continues

While adoption and usage is surging, the developers of this cryptocurrency are about to cut supply drastically.

Supply cut

The upcoming Ethereum Improvement Proposal (EIP) 1559 upgrades the system to lower the costs of transactions. If implemented, EIP 1559 will eliminate some ETH every time a transaction occurs. This helps maintain a low, flat fee for activity on the network. However, it also reduces circulating supply, which should boost the value of ETH.

The culmination of these two demand-side and one supply-side factor should propel ETH to the stratosphere in the months ahead.

How to buy Ethereum

Canadian investors can add ETH to their portfolio directly via brokerages like WealthSimple. However, if you want to hold crypto in your Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP), the Ether Fund (TSX:QETH.U) is your best option.

Each unit of the fund represents 0.01756762 ETH. That makes it a convenient, cost-effective way to add exposure without dealing with the complexities of cold storage, transaction fees, or tax implications of crypto.

Bottom line

The Ethereum network is poised for higher demand and lower supply, which could magnify its value. Add the Ether Fund to your portfolio for exposure.

The post 3 Reasons Ethereum Is About to Skyrocket appeared first on The Motley Fool Canada.

More reading

Fool contributor Vishesh Raisinghani has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Visa.

The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool Canada’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Motley Fool Canada 2021

Yes, Front-Running Will Still Exist on Ethereum 2.0

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Maximal extractable value (MEV) is quickly becoming a buzzword among Ethereum developers and traders alike, given the recent rise of decentralized finance (DeFi).

Congruently, the finish line for Ethereum 2.0’s consensus mechanism swap is within sight. Colloquially called “The Merge,” mining on Ethereum is likely to fall by the wayside within the next year or so in favor of staking. Doing so opens up a host of questions, particularly for those completing complex trades on Ethereum.

While GPU mining is likely to go away, MEV most likely won’t, according to a new report from research group Flashbots. Also called “miner” extractable value, MEV is crypto’s version of Wall Street front-running. Yes, that’s the same front-running strategy that brought a Massachusetts day trader to testify before Congress for his role in shorting big name hedge funds into the ground.

MEV, front-running and the race to be first

On a more technical level, MEV is all about transaction sequencing: who gets to be first in line to settle a transaction on-chain. Being first increases the odds of netting a profit on an arbitrage trade across various DeFi markets. And traders are willing to pay handsomely to be first in line by bidding up gas fees. Indeed, Flashbots data site shows some $40 million in MEV-based extracted value, when transaction fees are included.

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As Flashbots states, under the current schematics Eth 1.x clients will still be in charge of ordering transactions, similarly to how miners order transactions using Eth 1.x software. The Beacon Chain will only finalize these transactions by attesting and validating them via its staking network. Flashbots does state that validators, who act as block proposers, will eventually be capable of extracting MEV from traders as the final arbiter of a transaction.

That simple explanation leaves out a lot of open questions, however. The Beacon Chain processes transactions over a period of time called an “epoch,” which is divided into slots for nestling transactions. Epochs run about 6.4 minutes long and block proposers are given their positions ahead of time.

Searchers – those who look for MEV opportunities – could have a longer time to find profitable trades, given the heads-up block proposers have compared to the current Ethpow blockchain. So, it’s possible the race to outbid other traders becomes more crowded on Eth 2.0 than Ethpow.

Overall, MEV will work nearly the same as it does on Eth 2.0: The more technically inclined remain at an advantage over all others.

Pulse check: How Zelda, our Ethereum validator, is doing this week

(As of 3/30/2021 @ 21:05 UTC) Source: CoinDesk Data Dashboard and beaconcha.in

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.

Zelda – CoinDesk’s very own Eth 2.0 validator node – continues to cook up attestations.

Per Beaconcha.in, Zelda is nearing 8,000 attestations of the Beacon Chain. One day these attestations will secure value on the Beacon Chain, but for now they merely signal agreement on a block being finalized with other validators.

Sadly, Zelda has not been chosen in the past week to propose a block. So far, our little validator has proposed only two blocks in return for 0.2354 ETH, worth $433 at time of writing.

Let’s do a little napkin math for CoinDesk to break even. At a current rate of proposing one block per 20 days, CoinDesk needs about 271 block propositions, or 5,437 days, to make back on our initial ether investment.

Of course, those numbers are bound to change as validators join the network – and that’s assuming no malfeasance on Zelda’s part. This quick calculation also doesn’t include attestation rewards which Zelda is also reaping. As a reminder, all profits from Zelda will be donated to charity.

Validated takes

Ethereum Blockspace: Who Gets What and Why (Research, Anicca Research)

Staked Introduces Eth 2.0 Trust for Accredited Investors (Article, CoinDesk)

The Most Important Scarce Resource is Legitimacy (Blog Post, Vitalik Buterin)

Visa Settles USDC Transaction on Ethereum, Plans Rollout to Partners (Article, CoinDesk)

Venture-Backed Ethereum Project Optimism Delays Launch (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.