Lido fundamentals shine even as the wider crypto market struggles to regain traction

November 21, 2022 Coin Telegraph

Lido protocol boasts $1 million in daily fee revenue for nearly a month, highlighting its growth in daily active users and Ethereum stakers.

The crypto market has witnessed a turbulent few weeks after the FTX collapse but Lido Finance, a liquid staking protocol, has been a bright spot amidst the chaos. According to Data from DeFiLlama, Lido protocol has earned $1 million or more in fees daily since October 26.

Lido fees and revenue over time. Lido has collected over $1M in fees every day since October 26th pic.twitter.com/GHkzSzYIOo
— DefiLlama.com (@DefiLlama) November 18, 2022

Let’s analyze the on-chain fundamentals to see why this trend has continued.

What’s behind Lido Finance’s growth?

Lido’s growth started in May 2021, pre-FTX collapse. The fees reached an all-time high on Nov. 10 as fee revenue nearly topped $2.6 million. The protocol earns 10% of the total Ethereum (ETH) staking rewards generated from user deposits.

Data also shows a steady increase in deposits to Ethereum’s PoS consensus translates to an uptick in Lido’s fee capture.

*Lido total deposits. Source: Dune Analytics*

Lido’s fee revenue moves in tandem with Ethereum Proof-of-stake (PoS) earnings since Lido sends received Ether to the staking protocol. After the FTX collapse, Ethereum activity has grown thanks to an uptick in decentralized exchange (DEX) activity. Ethereum fees and revenue also reached a 30-day peak on Nov. 8, posting $9.1 million in fees and $7.3 million in revenue.

*Ethereum fees and revenue. Source: Token Terminal*

New and daily active users keep increasing

Unique depositors into the Lido protocol have reached 150,000, demonstrating that Lido is continuing to attract new users. The increase in unique deposits comes after centralized “earn” programs have shown weaknesses due to exposure to their exposure to FTX, Genesis, BlockFi and others.

*Lido unique deposits. Source: Dune Analytics*

Daily active users and Lido (LDO) token holders are also increasing on Lido. According to data from Token Terminal, daily active users hit a 90-day high of 837 on Nov. 17 further bolstering the platform’s positive momentum.

*Lido tokenholders and daily active users. Source: Token Terminal*

Lido’s market capitalization does not match its on-chain fundamentals

While fees, deposits and revenue continue to increase for Lido, the market cap of LDO tokens is not keeping pace.

As mentioned above, Lido hit a record amount of fees on Nov. 10, at the same time the market cap decreased from $1.2 billion to $663.7 million.

According to Coingecko, during this same period, the price of LDO tokens dropped from $1.80 to a low of $0.90.

*Lido’s circulating market cap and fees. Source: Token Terminal*

Despite the market-wide downturn, Lido is showing strong fundamentals on multiple fronts. The steady uptick in DAUs, revenue and new unique participants are all key components for assessing growth and sustainability within a DeFi platform.

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.

Is GPU mining profitable after the Ethereum Merge?

November 14, 2022 Coin Telegraph

Blockchain

The Ethereum merge is the upgrade from proof-of-work to proof-of-stake as a way of validating block transactions on the network.

What is the future of GPU mining?

The future of GPU mining depends upon miners’ willingness to continue mining alternative GPU mineable cryptocurrencies.

Mining, the foundation of PoW cryptocurrencies, may continue to flourish, given that energy costs are low for GPU miners. Moreover, the application of graphics processing units beyond mining, including graphics designing, gaming and video editing, make them ideal for fixed capital investment.

Also, when one blockchain migrates to alternative consensus algorithms, GPU miners can utilize their rigs to mine other cryptocurrencies. This implies that GPU miners can continue using their mining rigs during events like the Merge, unlike application-specific integrated circuit (ASIC) miners, as ASICs cannot be repurposed to mine alternative cryptocurrencies.

On the contrary, compared to GPUs, ASICs are more energy-efficient and offer a higher hash rate, inducing miners to switch to application-specific integrated circuit equipment. However, the cost of setting up an ASIC mining rig makes it unattractive to solo miners.

Above all, the equipment a miner chooses should be supported by the blockchain on which they will be mining cryptocurrencies. Other factors determining mining profitability include electricity costs, block reward, hash rate and cryptocurrency price that a miner is looking to mine, which must be taken into consideration before buying GPUs, CPUs, ASICs or any other mining equipment.

Can miners migrate to the PoS version of Ethereum?

Miners may change their business model to proof-of-stake consensus.

It is difficult for Ethereum supporters to abandon the chain due to the Merge and the possibility that it could render mining on Ethereum ineffective. However, decentralized finance (DeFi) staking has gained the interest of such people because of higher payouts, as fees that were formerly paid by the blockchain to miners will shift to validators.

More technical upgrades, revisions and forks will follow the Merge, according to Ethereum cofounder Vitalik Buterin. For instance, Ethereum Foundation intends to introduce and refine sharding and rollups on the blockchain, which will positively impact transaction speed and gas fees.

Additionally, Ethereum core developers hope to simplify data storage on the blockchain with the Purge and the Verge. The Purge is a technical improvement that will reduce storage space for storing Ether on a hard disk. This will eliminate the need for nodes to keep transaction history and simplify the Ethereum protocol.

Another concept called the Verge, which is an implementation of Verkle Trees as a sort of mathematical proof, will allow any Ethereum user to become a network validator, as they won’t need extensive disk storage to keep vast amounts of block data.

Large-scale miners may adopt a data-focused strategy and engage in high-performance computing. For example, GPU miners could gain from Web3 protocols like Livepeer and Render if they can pool resources. Nonetheless, a considerable concern is still in the air of imminent Ether (ETH) selling pressure.

An Ethereum GPU miner can invest more in what they already have and explore other emerging technologies like artificial intelligence (AI), cloud computing and others. Furthermore, the GPUs can be repurposed for cloud computing without necessarily having to add more investment. For example, Hut 8 Mining, which has over 180 GPUs, is already refurbishing its Ethereum data center for machine learning, AI and engineering purposes.

What are the alternative options for Ethereum miners?

The Merge forced miners to shift to alternative GPU mineable cryptocurrencies, a newly forked version or dump or sell their equipment at a low price.

Shift to alternative GPU mineable cryptocurrencies

One of the direct effects of the Merge includes miners turning to the Ethereum fork, Ethereum Classic (ETC), to keep utilizing their equipment. For instance, the blockchain fork’s hash rate increased the day after the Merge. The hash rate describes the computation power needed to approve a transaction on the blockchain through a proof-of-work consensus mechanism.

As Ethereum Classic blockchain still practices the PoW method for mining, Canada-based Hive blockchain (crypto mining giant) disclosed its plans to mine other proof-of-work cryptocurrencies like ETC, Dogecoin (DOGE) and Litecoin (LTC), among others. However, shifting to a PoW blockchain may undermine the environmental benefits that the PoS version offers.

Ethereum miners can switch to a newly forked version

A Chinese miner who resists Ethereum Network’s shift to proof-of-stake forked Ethereum to preserve the proof-of-work consensus method. The newly forked version is called the EthereumPOW (ETHW), which hopes to accommodate GPU miners in the future.

The trade of tokens reflecting a proof-of-work fork of Ethereum is supported by cryptocurrency exchanges like Poloniex and BitMEX as well as the Tron blockchain.

Some of the GPU miners may quit the game

Returning to past revenue figures that were provided on Ethereum is difficult. Those chances are low with stablecoin chains or any other PoW blockchain. Overflow of hash rate to alternative GPU mineable coins is also a threat to the mining venture.

It is challenging to earn previous rewards that were offered on Ethereum, due to which miners started shifting to alternative GPU-mineable coins. However, the increased hash rate means a hike in mining difficulty, causing miners to get rid of GPU miners.

Hive blockchain agrees that only miners with efficient equipment will succeed in the long run for this reason. As a result, many miners may sell their GPUs if the difficulty of alternate chains keeps increasing.

On the other hand, the selling may not occur since a dumping effect will result from an increasing supply of GPU capability compared to a decrease in demand. Therefore, the likely outcomes of such a scenario can be a vast majority of miners either dumping or selling their equipment at low prices. However, as crypto mining places a lot of strain on the GPU hardware, gamers and even film editors might not be optimistic about buying the machines.

What are the pros and cons of GPU mining?

Using a GPU for mining offers both benefits like scalability and faster processing but with drawbacks such as complex setup processes, maintenance and electricity cost.

GPU mining is inherently more powerful than central processing unit (CPU) mining, as graphical processing units can handle the same calculations faster. In addition, the system’s power can be enhanced by using extra graphic cards, making GPU mining a scalable alternative to CPU mining.

The more advanced GPUs come with gaming, video editing and machine learning support, giving them the versatility to speed up various applications outside of typical graphics rendering. For instance, graphical processing units can render 2D and 3D graphics, allowing gamers to play at larger resolutions.

Similarly, since GPUs have a staggering amount of computational power, they can significantly speed up applications like image recognition that benefit from their highly parallel architecture. In computing, GPU parallel processing refers to the simultaneous execution of numerous calculations or processes.

Nonetheless, the process of setting up a GPU mining rig is quite complex, which involves downloading and configuring software that supports GPU mining, signing up for a mining pool, and creating a worker (mining device’s name that serves as the login for mining software).

Moreover, unexpected errors can cause defects in the equipment, which poses a financial burden on the miner. Also, the cost of electricity may not be covered by the reward (amount of cryptocurrency) earned in return for providing computing power.

What does the Ethereum Merge mean for Ethereum mining and GPU miners?

Ethereum upgraded from proof-of-work to proof-of-stake, meaning miners will be out of work, and their equipment will be useless.

GPU miners are individuals that validate transaction blocks by using specialized graphics cards to solve challenging mathematical challenges. Miners use graphic cards because they can quickly and repeatedly divide and process tasks that need a lot of energy and resources.

However, Ethereum’s prolonged plan to reduce energy consumption by 99% by phasing out cryptocurrency mining was completed on Sept. 15, raising concerns about existing mining equipment. For instance, it may result in an accumulation of e-waste brought on by increased useless mining rigs, which could trigger another climate emergency, ultimately offsetting the advantages of the switch to the proof-of-stake (PoS) consensus mechanism.

Unlike proof-of-work (PoW), where several computers act as nodes and validate a single block, randomly selected validators create new blocks in PoS. In the long term, this renders thousands of graphical processing unit (GPU) rigs useless, making Ethereum mining less economical than it has previously been.

Ethereum turns deflationary for the first time since the Merge — ETH price still risks 50% drop

November 11, 2022 Coin Telegraph

Coin Telegraph

A bearish technical setup and a declining number of Ether whales pose downside risks for ETH’s price.

The annual supply rate of Ether (ETH) slipped below zero for the first time since Ethereum’s transition to proof-of-stake via the Merge in September. The reason? A spike in on-chain activity amid a massive cryptocurrency market crash.

Ether turns deflationary for real

As of Nov. 9, more Ether tokens are being burned than created as a part of Ethereum’s fee-burning mechanism. Simply put, the more on-chain transactions, the more ETH transaction fees get burned.

On a 30-day timeframe, the Ethereum network has been burning ETH at an annual rate of 773,000 tokens against the issuance of 603,000 tokens. In other words, ETH’s supply is going down by 0.14% per year.

*Ether supply growth as of Nov. 11. Source: Ultrasound.Money*

Overall, the Ethereum network has burned 2.72 million ETH since the fee-burning mechanism was introduced in August 2021. That amounts to the permanent destruction of nearly 4 ETH per minute.

Ethereum’s transaction fees spiked to their highest levels since May 2022 due to traders rushing to transfer their ETH to and from exchanges amid the dramatic collapse of FTX.

*Ethereum transaction fees performance in the last six months. Source: YCharts*

In detail, nearly 1 million ETH has left exchanges in November, according to data from Glassnode.

*Ether balance on all exchanges. Source: Glassnode*

Many analysts see Ether’s deflationary prospects as a bullish signal, which should boost its overall scarcity. But the ongoing deflationary rate is a product of current ETH price volatility, which may hurt its recovery prospects in the near term.

Ether’s price in danger of another 50% crash

Ether’s price dropped nearly 20% month-to-date and was trading around $1,250 on Nov. 11 after it had rebounded from its $1,075 local low.

Furthermore, Ether’s price action has also entered the breakdown stage of its prevailing symmetrical triangle pattern, which may push the price down further by another 50% from current levels.

Symmetrical triangles are continuation patterns, meaning they typically resolve after the price breaks out of their range while pursuing the direction of its previous trend. As a rule of technical analysis, the pattern’s profit target is measured after adding the triangle’s height to the breakout point.

*ETH/USD 3-day price chart featuring symmetrical triangle’s breakdown setup. Source: TradingView*

Applying the theory to Ether’s symmetrical triangle places its downside target at around $675 by December 2022, down about 50% from current prices.

$ETH

It got rejected from 1600-1650. Now it's looking bullish on ltf, so expecting a last leg up to 1700, matching with BTC going to 21000-21500.

1700 is a key resistance. It should get rejected hard.

Main target for a local bottom = $700-800 pic.twitter.com/UkAphVl2MV
— il Capo Of Crypto (@CryptoCapo_) November 2, 2022

More bearish arguments stem from a recent decline in the supply held by Ethereum’s richest investors.

Notably, the duration of Ether’s November downtrend has coincided with the drop in Ether supply held by addresses with a balance between 1 million ETH and 10 million ETH.

*Ether supply percentage held by addresses with 10K–10M ETH balance. Source: Santiment*

Conversely, addresses with a balance between 1,000 ETH and 10,000 ETH have risen during the price decline.

This could mean two things. First, addresses with over 10,000 ETH tokens reduced their holdings and thus landed in the smaller cohorts.

These cohorts may include exchange wallets that have witnessed massive ETH outflow amid the FTX fiasco.

*Ether supply percentage held by addresses with 10–10K ETH balance. Source: Santiment*

Second, the 10–10,000 ETH cohort saw Ether’s price decline as a “buy the dip” opportunity, which boosted its control over Ether’s supply in November.

What is Humanode human-powered blockchain?

November 5, 2022 Coin Telegraph

Biometric security

Humanode is the decentralized crypto-biometric network based on 1 human = 1 node = 1 vote ethos that brings Sybil resistance to the crypto space.

The future of blockchain and biometrics merge

The merge of blockchain and biometrics has cogent potential. A new emerging ecosystem based on it is here to improve human life as such.

The current crypto paradigm is dominated by power- and capital-based schemes. Appearing as an alternative, Sybil-resistant human-based protocols allow reorienting the systems away from such technocratic and oligopolistic narratives, providing true decentralization and democracy.

Infrastructures based on human biometrics combined with blockchain are capable of creating innovative decentralized human-based digital verification layers and stable financial networks that rely on the existence of human life itself.

Biometric-based blockchain projects formalize a new framework for a prosperous and regenerative world, each in its own unique way. Some of them specialize in identity verification for blockchain services, some of them provide solutions for metaverse authentication, and some are interested in improving things like universal basic income (UBI). Be that as it may, they accelerate a new possible human future where inevitable uniqueness and equality are the main powers.

Humanode features

Humanode embraces a number of exclusive features that help the project achieve its goals.

First and foremost, Humanode provides biometric Sybil resistance. With ensured decentralized biometric identification based on liveness detection, the network is owned and operated by real unique humans.

Humanode accelerates the spread of equality since each user can only create one identity, meaning that they can only launch one node and hence has a single vote. This means truly equal co-ownership of the network with equal distribution of power and fees among users.

Also, Humanode leverages self-sovereign and decentralized identity (DID) to give users full control over their digital personal data. All data is decentralized, encrypted and kept fully and securely on-chain.

Pseudonymity means that Humanode users can freely interact with the network without having to reveal their identity but only by proving they are real human beings. Furthermore, there will be no more concerns about data privacy, as Humanode uses crypto-biometrics to protect biometric data that never leaves users’ devices.

The need for a common device such as a smartphone or a PC to launch a human node means broader accessibility and fast and user-friendly biometric authentication brings usability to the system. Being a Substrate-based platform, Humanode is also interoperable with the broader Ethereum ecosystem making it accessible to thousands of passionate developers.

Moreover, Humanode’s crypto-biometric processing scheme alongside 1 human = 1 vote DAO infrastructure is easy to integrate through the direct Application Programming Interface (API), bringing Sybil resistance, decentralization and more advantages to any chain.

And, last but not least, Humanode introduces a cost-based fee system that denominates transaction fees in United States dollar, based on the actual use of resources. Pegging the USD value not only ensures that Humanode’s (HMND) volatility does not affect resource costs, but also provides a more intuitive user experience

What is crypto-biometrics and how does it work?

Crypto-biometrics is a mix of innovative advanced technologies, which includes blockchain, encryption, cybersecurity, zero-knowledge proofs, biometrics and liveness detection.

To meet the security and privacy requirements of protecting particularly sensitive personal biometric data in a globally distributed system that runs on nodes connected to thousands of human beings, simply encoding the biometric information is not enough.

Humanode utilizes crypto-biometric identification mechanisms that are based on a combination of various technologies and exist at the intersection of the disciplines such as mathematics, information security, cybersecurity, biometrics, liveness detection, zk proofs, homomorphic encryption and, of course, blockchain.

To become a human node, users need to prove that they are real living human beings and not deep fakes, photos, masks or something else. To do so, users go through live video-based 3D face scans and liveness detection. During this process, the 3D face mapping vector of the neural network is converted to numerical values and encrypted. After that, the public and private keys are created and, at that point, users can launch their nodes.

For registered Humanode users, once they log in after biometric identity verification, the 1 to n search and matching operation happens in an encrypted space. And, because it is zk-based, the only piece of information that is searched for and is given out is whether the user is registered.

How does Humanode work?

Humanode is a project that gracefully combines different technological stacks including blockchain and biometrics.

Humanode tech encompasses a bunch of layers such as a blockchain layer represented by a Substrate module: a biometric authorization module based on cryptographically secure neural networks for the private classification of three-dimensional (3D) templates of users’ faces, a private liveness detection mechanism for identifying real human beings, a Vortex decentralized autonomous organization (DAO) and a monetary algorithm named Fath, where monetary supply reacts to real value growth and emission is proportional.

Let’s look at them in more detail.

Substrate framework

Humanode is a layer-1 blockchain whose architecture lies on the Substrate open-source framework that allows the quick development of highly customized blockchains. Substrate, the brainchild of the Parity team, provides interoperability within the Polkadot and Kusama ecosystems as well as an environment for the creation and deployment of general-purpose or specialized blockchain networks with remarkably varied parameters and sound capabilities. Being a Substrate-based chain, Humanode benefits from it and from the high throughput and scalability inherent to the Polkadot ecosystem.

Consensus agnostic protocol

One of the interesting features of Humanode is consensus agnosticism, which is the ability to change the network’s consensus mechanism if the Humanode DAO approves it. It derives from the necessity for constant research on the most suitable consensus for a leaderless system with equal validation power of nodes. Different consensus mechanisms have numerous pros and cons which constantly change. A swappable consensus mechanism allows the system to evolve and not be limited by a single unchangeable framework.

EVM-compatible smart-contract layer

On top of that, Humanode is Ethereum-compatible. Due to an Ethereum Virtual Machine (EVM) pallet, Humanode can use existing Ethereum development tools and take advantage of smart contracts development, supported by several popular languages including Solidity and WebAssembly. On the other hand, Humanode can provide private biometric processing and Sybil-resistance to numerous Ethereum-based decentralized applications (DApps) including decentralized finance (DeFi) and play-to-earn (GameFi) projects, NFT solutions, DAOs, metaverses and others.

Private biometric search and matching

As for Humanode’s biometrics stack, it seems like the privacy and security of biometric data have been among the most critical aspects of the project.

Due to the private classification of images of users’ faces, the system guarantees the images’ privacy, performing all operations without the users’ biometrics data having to leave the device. The only device needed to pass biometric authentication is a smartphone with a camera. Once users scan their faces, they become human nodes. The whole process is private and secure. All the Humanode system cares about is if the user is a unique human being, if they are registered and if they are alive.

Decentralized liveness detection

A technique that ensures that the biometric sample is submitted from a real live person, a substantial security feature that mitigates the vulnerability of biometric systems to spoofing attacks, is called liveness detection. Biometric liveness refers to the use of computer vision technology to detect the actual presence of a living user rather than a representation such as a photograph or a mask, video or screen, a fake silicon fingerprint or other spoof artifacts.

Biometrics accuracy grew tremendously in the last decade. Currently, the possibility of a match between two different people is 1 to 125,000,000, and the possibility of spoofing an identity without a real human in front of the camera is 1 to 80,000. And, these numbers are constantly improving.

For its first version of the crypto-biometric identification solution, which utilizes secure enclaves for some portions of the process, Humanode integrates FaceTec’s face biometrics and liveness detection. Humanode’s first testnet was launched in January 2021 and the official testnet 1 with liveness detection and the updated technical stack was launched in September 2021. Since then, there have been additional testnets deployed with more than 10,000 people becoming human nodes.

Vortex DAO

Currently, there are three types of nodes in the Humanode ecosystem. First, human nodes who have passed biometric authentication and received a fraction of the network transaction fees. Then, there are delegators: nodes that opt to delegate their voting power to so-called governors. Governors are nodes that participate in Humanode’s governance and must meet certain governing requirements.

Each of these node types forms an important part of Humanode’s governance DAO named Vortex. Unlike other projects, which allow nodes to accumulate voting power based on how much capital they have or delegate, the Humanode platform ensures that all nodes are equal in terms of validation and voting power, bringing true equality between peers in a decentralized environment.

Fath monetary algorithm and rebalancing system

Humanode implements the Fath hypothesis as the basis for the circulation of HMND Humanode token (HMND). Fath is a monetary algorithm with a proportional distribution of issued tokens. It is an alternative to modern fiat credit-cycle financial networks and capital-based public blockchains.

What problems does Humanode solve?

Humanode brings decentralization, Sybil resistance and innovative governance models to the blockchain industry using biometric technology.

In its very foundations, the Humanode project aims to bring accessibility, inclusivity and innovation in the tech and crypto spaces and economics as a whole. The project is an alternative to the majority of blockchain networks that are based on consensus algorithms such as proof-of-work (PoW) and proof-of-stake (PoS) that currently dominate the field.

It is known that PoW and PoS are decentralized technologically but not power-wise, granting voting rights and rewards in proportion to users’ economic investments in an activity or resource, stake or computational power, leading to capital-based oligopolies and mining pools.

In contrast to PoW and PoS, Humanode utilizes facial recognition biometrics with the combination of proof-of-uniqueness and proof-of-existence — efficient tools capable of creating a decentralized protocol to counter malicious attacks on online platforms. The most spread attacks on peer-to-peer networks are Sybil attacks with the utilization of multiple fake virtual identities or, in the case of cryptocurrencies, nodes.

The Humanode system is designed to check and ensure that every person in the network is unique and has a singular identity. Human nodes are created through crypto-biometric authentication which is a combination of cryptographically secure matching and liveness detection mechanisms verifying the uniqueness and existence of real human beings.

Bringing equality and Sybil resistance to the system, Humanode design guarantees every individual the same amount of voting power and rewards, creating a democratic and fair peer-to-peer structure.

What is Humanode?

Humanode is the first human-powered crypto-biometric network, where 1 human = 1 node = 1 vote.

Humanode is a new-age decentralized crypto-biometric network that integrates pioneering cryptography with private biometrics and blockchain technology. The project aims to create a strong and sustainable decentralized system that is grounded on the existence of unique human beings.

The Humanode project was conceived by the co-founders of Paradigm research institute in 2017. They were one of the many who were optimistic about the Web 3 potential but, at the same time, were stumped by the fact that mining cartels and validator oligopolies seemed to dominate the crypto market. By using human biometrics as the stake, the founders of Humanode saw the possibility of creating a truly decentralized network of equals.

Humanode enables a range of new use cases while solving problems with existing ones.

With Humanode enabling the pseudonymous biometric DIDs tied to various online services, many spheres stand to benefit from such as insurance, financial services that involve credit score, trading, marketplaces, yield farming and many others including airdrops, healthcare, metaverse authentication and nonfungible token (NFT) ownership.

Polygon Studios’ Ryan Watt talks Web3’s core principles and fairer internet

November 5, 2022 Coin Telegraph

Coin Telegraph

Ryan Wyatt, the CEO of Polygon Studios, shares his thoughts on blockchain upgrades and his plans for Polygon in supporting the upcoming Web3 disruption.

The year 2022 in crypto was eventful in many ways. However, the negative impacts of a bear market dampened the excitement around the blockchain upgrades that significantly brought crypto ecosystems closer to the future of finance.

For Bitcoin, it was the Taproot soft fork upgrade, which was aimed at improving the scripting capabilities and privacy of the Bitcoin network. Ethereum underwent the Merge upgrade to transition from a proof-of-work to a proof-of-stake (PoS) consensus mechanism.

Leading decentralized Ethereum scaling platform Polygon kicked off the year with mainnet upgrades based on Ethereum Improvement Proposal (EIP)-1559, otherwise known as the London hard fork. The upgrade was accompanied by Polygon (MATIC) token burning and better fee visibility.

On Jan. 25, Ryan Wyatt joined Polygon Studios as the CEO after resigning from YouTube as global head of gaming. Speaking to Cointelegraph, Wyatt discussed the importance of timely blockchain upgrades and his vision for Polygon.

Cointelegraph: What is your perspective on blockchain upgrades when it comes to Polygon? What are some key points of consideration when discussing changes to the network?

Ryan Wyatt: As with everything we do, Polygon takes a holistic approach to upgrades. There are always multiple different solutions to every issue, so it is more productive to explore as many of them as possible. There are many paths to explore when it comes to Ethereum scaling, and aggregating multiple solutions together represent the most promising strategic approach.

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For example, our latest upgrade, zkEVM — the first zero knowledge rollup fully compatible with Ethereum Virtual Machine (EVM) — is principally designed to address Ethereum’s high transaction fees and latency. Whereas Polygon Avail, which we announced shortly before zkEVM, addresses the data availability problem by taking a modular approach (decoupling transaction execution from data availability).

It is already clear that there cannot be a “one solution to rule them all,” a full suite of scaling products needs to be developed to bring mass adoption to Ethereum and Web3 in general.

CT: How do you think the general public perceives blockchain upgrades? And, what impact does it have on the decision-making process for the devs, if any?

RW: Decentralization, usability and user-centricity are among the core principles of Web3, so network upgrades often reflect those ideals. We believe that people usually appreciate upgrades that aim to increase the overall utility and usability of blockchains. Similarly, developers tend to prioritize their communities’ needs when discussing and implementing upgrades, so that’s a mutually beneficial relationship.

CT: What implications do blockchain upgrades such as the Merge have on the other ecosystems that are directly or indirectly connected to the Ethereum ecosystem?

RW: Before the Merge, almost all carbon emissions on Polygon — roughly 99.9% — emanated from smart contracts and holdings on the Ethereum network. Subsequently, as the Merge has now massively reduced Ethereum’s own energy consumption and ensuing carbon emissions, this positive effect has also rubbed off on Polygon and related platforms, making them much more sustainable as well.

The scaling issue, however, still persists. While the transition to PoS laid the groundwork for sharding and other scaling techniques, it did little to remediate issues with high fees and slow transaction speeds. As such, layer-2 solutions like Polygon still hold invaluable utility. As Ethereum becomes more scalable and efficient, so will Polygon; every improvement made to Ethereum enhances Polygon’s existing strengths.

CT: What is Polygon’s secret to becoming one of the biggest names in the crypto space. Also, how do you intend to maintain a dominant position in the future?

RW: Polygon’s primary mission is to help in collaborative building toward a fairer internet, where anyone can find opportunities anywhere. We provide the infrastructure for a new world where people and technology collaborate and exchange value globally and freely, without gatekeepers or intermediaries.

To this end, Polygon is onboarding world-class new talent from Web2 and Web3 to provide both the tech stack and the infrastructure needed to ensure long-term success for projects. Polygon’s recruitment drive includes top-tier talent from leading companies such as EA, Amazon and Google.

Meanwhile, Polygon’s developer network is constantly expanding and now exceeds 37,000 decentralized applications (DApps), while more than 60 metaverse platforms support Polygon, including Sandbox, Decentraland and Somnium Space.

Polygon is also helping many Web2 companies, including Starbucks, Adobe, Clinique and Stripe, to integrate Web3 functionality and has raised $450 million in February to further fuel its Web3-focused initiatives.

CT: Does Ethereum’s latest upgrade help improve Polygon?

RW: All DApps in the Polygon ecosystem now benefit from significantly lower energy consumption/carbon emissions thanks to the Merge. This is coupled with our own sustainability efforts, which saw the network go carbon neutral this year — benefiting thousands of Polygon DApps with a negligible carbon footprint.

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By the end of the year, Polygon aims to go carbon-negative as it continues to onboard projects that cater to Web3. Businesses in crypto have taken the lead in building Web3 solutions and blockchain networks like Polygon are prepared to onboard, enable cross-compatibility with other ecosystems and improve the overall performance of such offerings.

Ethereum flashes a classic bullish pattern in its Bitcoin pair, hinting at 50% upside

October 31, 2022 Coin Telegraph

Bitcoin

The formation of a bullish trading pattern suggests that the ETH/BTC pair could be on the verge of a trend reversal.

Ethereum’s native token, Ether (ETH), looks poised to log a major price rally versus its top rival, Bitcoin (BTC), in the days leading toward early 2023.

Ether has a 61% chance of breaking out versus Bitcoin

The bullish cues emerge primarily from a classic technical setup dubbed a “cup-and-handle” pattern. It forms when the price undergoes a U-shaped recovery (cup) followed by a slight downward shift (handle) — all while maintaining a common resistance level (neckline).

Traditional analysts perceive the cup and handle as a bullish setup, with veteran Tom Bulkowski noting that the pattern meets its profit target 61% of all time. Theoretically, a cup-and-handle pattern’s profit target is measured by adding the distance between its neckline and lowest point to the neckline level.

The Ether-to-Bitcoin ratio (or ETH/BTC), a widely tracked pairing, has halfway painted a similar setup. The pair now awaits a breakout above its neckline resistance level of around 0.079 BTC, as illustrated in the chart below.

*ETH/BTC weekly price chart featuring a cup and handle. Source: TradingView*

As a result, a decisive breakout move above the cup-and-handle neckline of 0.079 BTC could push Ether’s price toward 0.123 BTC, or over 50%, by early 2023.

*ETH/BTC weekly price chart featuring cup-and-handle breakout setup. Source: TradingView*

Time to turn bullish on ETH?

Ether’s strong interim fundamentals compared with Bitcoin further improve its possibility of undergoing a 50% price rally in the future.

For starters, Ether’s annual supply rate fell drastically in October, partly due to a fee-burning mechanism called EIP-1559 that removes a certain amount of ETH from permanent circulation whenever an on-chain transaction occurs.

*Ethereum supply rate post-Merge. Source: Ultra Sound Money*

XEN Crypto, a social mining project, was mainly responsible for raising the number of on-chain Ethereum transactions in October, leading to a higher number of ETH burns, as Cointelegraph previously covered .

Over 2.69 million ETH (approximately $8.65 billion) has gone out of circulation since the EIP-1559 update went live on Ethereum in August 2021, according to data from EthBurned.info.

It shows that the more clogged the Ethereum network becomes, the higher Ether’s probability of entering a “deflationary” mode gets. So, a depleting ETH supply may prove bullish, if the coin’s demand rises simultaneously.

In addition, Ethereum’s transition to a proof-of-stake consensus mechanism via “the Merge” has acted as an Ether-supply sucker, given that each staker — whether an individual or a pool — is required to lock away 32 ETH in a smart contract to earn annual yields.

The total supply held by Ethereum’s PoS smart contract reached an all-time high of 14.61 million ETH on Oct. 31.

*Ethereum 2.0 total value staked. Source: Glassnode*

In contrast, Bitcoin, a proof-of-work (PoW) blockchain that requires miners to solve complex mathematical algorithms to earn rewards, faces persistent selling pressure.

In other words, there is a comparatively higher selling pressure for Bitcoin versus Ether.

ETH/BTC needs to break the range resistance

Ether’s road to a 50% price rally versus Bitcoin has one strong resistance area midway, acting as a potential joy killer for bulls.

In detail, the 0.07 BTC–0.08 BTC range has served as a strong resistance area since May 2021, as shown below. For instance, the December 2021 pullback that started after testing the said range as resistance resulted in a 45% price correction by mid-June 2022.

*ETH/BTC weekly price chart. Source: TradingView*

A similar pullback could have ETH test the 0.057–0.052 range as its primary support target by the end of this year or early 2023.

The Merge brings down Ethereum’s network power consumption by over 99.9%

October 29, 2022 Coin Telegraph

Coin Telegraph

Before the Merge upgrade, in 2022, the energy consumption of Ethereum ranged between 46.31 terawatt hour (TWh) per year to 93.98 TWh per year.

The Merge, which is considered one of the most significant blockchain upgrades on Ethereum (ETH) to date, brought down the network’s energy consumption by 99.9% immediately.

On Sept. 15, the Ethereum blockchain migrated from proof-of-work (PoW) to a proof-of-stake (PoS) consensus mechanism in an effort to transition into a green blockchain. What followed was an immediate and steep drop in total energy consumption of the Ethereum network.

*The Ethereum Energy Consumption Index. Source: digiconomist.net*

Before the Merge upgrade, in 2022, the energy consumption of Ethereum ranged between 46.31 terawatt hour (TWh) per year to 93.98 TWh per year. The lowest energy consumption for Ethereum was recorded on Dec. 26, 2019, at 4.75 TWh per year.

*The estimated annual energy consumption in TWh/yr for various industries. Source: ethereum.org*

Starting from Oct. 15, the day of the Ethereum Merge, Ethereum’s energy dropped down by over 99.9% and continues to maintain low energy usage. As a result, the network’s carbon footprint currently stands at 0.1 million tonnes of CO2 (MtCO2) per year.

When translated to single Ethereum transactions, the electrical consumption is as low as 0.03 kilowatt hour (kWh) and the carbon footprint stands at 0.01 kgCO2, which according to digiconomist, is equivalent to the energy used when watching two hours of YouTube.

Despite the celebrations around Ethereum’s transition to PoS, community members raised concerns related to the blockchain’s centralization and higher regulatory scrutiny.

The centralization aspect became evident right after the Merge, as 46.15% of the nodes for storing data, processing transactions and adding new blockchain blocks could be attributed to just two addresses.

While Ethereum proponents claim that anyone with 32 ETH can become a validator, it is important to note that 32 ETH, or around $41,416, is not a small amount for a newbie or common trader.

What does the global energy crisis mean for crypto markets?

October 25, 2022 Coin Telegraph

Bitcoin Price

While miners stand to be significantly affected by the current power crisis, there is still some hope that the prevailing macro conditions could work in favor of the crypto industry.

There’s no denying that the world is currently facing an unprecedented energy crisis, one that has compounded severely in the aftermath of the COVID-19 pandemic so much so that countries across the globe — especially across Europe and North America — are witnessing severe shortages and steep spikes in the price of oil, gas and electricity.

Limited gas supplies, in particular, stemming from the ongoing Russia-Ukraine conflict, have caused the price of essential commodities like fertilizer to shoot up dramatically. Not only that, but it has also resulted in the heightened use of coal and other natural resources. Coal consumption within Europe alone surged by 14% last year and is expected to rise by another 17% by the end of 2022.

To expound on the matter further, it is worth noting that European gas prices are now about 10 times higher than their average level over the past decade, reaching a record high of approximately $335 per megawatt-hour during late August.

Similarly, the United States Energy Information Administration’s recently published winter fuel outlook for 2022 suggests that the average cost of fuel for Americans will increase by a whopping 28% as compared to last year, rising up to a staggering $931.

With such eye-opening data out in the open, it is worth delving into the question of how this ongoing energy shortage can potentially affect the crypto sector and whether its adverse effects will recede anytime soon.

The experts weigh in on the matter

Matthijs de Vries, founder and chief technical officer for AllianceBlock — a blockchain firm bridging the gap between decentralized finance (DeFi) and traditional finance — told Cointelegraph that the global economy is in bad shape thanks to a multitude of factors including the power crisis, looming recession, surging inflation and rising geopolitical tensions. He added:

“These issues are interlinked, primarily in the way that capital flows in and out of impactful industries. The worse the macroeconomic climate, the lower the capital (liquidity) that flows in and out of the digital asset industry. This liquidity is what enables the incentivization mechanisms of blockchain to continue working. So, for miners, if there is a shortage of liquidity, this means fewer transactions for them to confirm, lesser fees and decreased incentives.”

Moreover, de Vries believes that rising energy costs could provide additional incentives for miners to move toward the validator ecosystem of Ethereum 2.0 that relies on a far more energy-efficient proof-of-stake (PoS) mechanism.

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A somewhat similar sentiment is echoed by Yuriy Snigur, CEO of Extrachain — an infrastructure provider for distributed applications, blockchains and decentralized autonomous organization (DAO) platforms — who believes that the ongoing energy price surge will impact proof-of-work (PoW) blockchains the most.

“They are the most dependent on the energy sector. In my opinion, the value of a blockchain should not come from the meaningless burning of energy, which is why PoW is doomed eventually,” he noted.

Worsening macroeconomic climate will hurt crypto in near term

Nero Jay, founder of the crypto YouTube channel Dapp Centre, told Cointelegraph that the challenges being witnessed will continue to have an overall negative impact on the crypto market, as a result of which most investors will continue to look at this yet nascent sector as being speculative and risky, at least for the foreseeable future.

However, as a silver lining, he noted that the aforementioned challenges could serve as an opportunity for increased crypto adoption, especially as many countries like Venezuela, Turkey, Argentina, Zimbabwe and Sudan continue to be ravaged by hyperinflation and sanctions, which may give crypto assets more utility and use cases.

Lastly, Jay believes that the worsening energy situation could result in increased scrutiny of the mining sector, especially since proponents of the zero carbon emission campaign will now have more fuel to criticize the space.

“Many are questioning the impact that crypto mining may have on the environment. The great news is we are already seeing many cryptocurrency projects, including Ethereum, that are making their blockchain platforms very efficient and low carbon emission based,” he said.

Bitcoin’s price and its relationship with the energy market

From the outside looking in, increased energy prices will raise costs for miners, which in turn could force them to sell their held Bitcoin (BTC), thereby pushing down prices. Furthermore, heightened production can result in miners demanding higher prices to cover their daily operational costs and, in some cases, even forcing them to shut down their operations entirely or sell their equipment.

Also, even if miners continue to go out of business, the total volume of BTC being mined will remain the same. However, the block rewards will be distributed among fewer individuals. This suggests that miners who can stave off the bearish pressure induced by rising energy costs stand to make massive profits. Andrew Weiner, vice president for cryptocurrency exchange MEXC, told Cointelegraph:

“Electricity shortages can lead to higher electricity prices, raising the cost of Bitcoin mining substantially. In the event of a regional long-term power shortage, it will cause the migration of miners to other jurisdictions where relatively cheap electricity prices offer safety and stability.”

Hope still remains for a trend reversal

Weiner said that, while the energy crisis could put pressure on Bitcoin’s price, the poor lackluster state of the global economy could potentially counter this.

In Weiner’s view, the U.S. Federal Reserve’s monetary policy in the current global economic environment has had the most significant influence on the cryptocurrency market, adding:

“Beginning with the implementation of loose monetary policy by the Federal Reserve in 2020, institutions have digitally transformed their back-offices and accelerated their purchases of Bitcoin. When fiat depreciates, institutions adjust their strategy to allocate bitcoin as value-preserving assets.”

He further noted that the cryptocurrency market, especially Bitcoin, is becoming increasingly correlated with Nasdaq and the S&P 500, while its correlation with energy, oil and electricity will not be significant unless BTC mining becomes affected by a future global electricity shortage.

Moreover, the ongoing energy crisis can potentially trigger more government spending programs resulting the them “printing” more money to get themselves out of trouble. This can potentially result in a loss of confidence in fiat assets and more demand for digital currencies. This trend is not beyond the realm of possibilities since it is already being witnessed across several third-world nations and could even permeate into certain larger economies as well.

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Just a couple of months ago, inflation in the eurozone scaled up to an all-time high of 8.9%, a situation that was also witnessed in the United States, where inflation surged to a forty-year high of 8.5% back in August. And, while many individuals continue to be divided on the positive/negative impact of the stimulus packages on the global economy, the fear of increased inflation alone stands to raise the demand for cryptocurrencies.

Therefore, as we head into a future plagued by potential energy shortages and price surges, it will be interesting to see how the future of the digital asset market continues to play out, especially as rising geopolitical tensions and worsening market conditions continue to make matters worse.

Ethereum at the center of centralization debate as SEC lays claim

October 24, 2022 Coin Telegraph

Coin Telegraph

Ethereum’s transition to PoS was celebrated as a key upgrade. However, a month after the move, centralization concerns are mounting high.

Ethereum went through a key network upgrade on Sept. 15, shifting from its proof-of-work (PoW) mining consensus to a proof-of-stake (PoS) one. The key upgrade is dubbed the Merge.

The Merge was slated as a critical change for the Ethereum network that would make it more energy efficient, with later improvements to scalability and decentralization to come.

A little over a month later, however, some industry observers fear the PoS transition has pushed Ethereum toward more centralization and higher regulatory scrutiny.

The Merge replaced the way transactions were verified on the Ethereum network. Instead of miners putting in their computational power to verify a transition, validators now pledge Ether (ETH) tokens to verify those transactions. The issue with this system is that validators with a higher number of Ether have a larger say, given they have a larger percentage of validator nodes or staked ETH.

To become a validator on the Ethereum network, one must stake a minimum of 32 ETH. Thus, whales and big crypto exchanges have staked millions of ETH to have a larger portion of the validator nodes.

Current staking activities look very centralized, with the leading liquid staking protocol Lido and leading centralized exchanges such as Coinbase, Kraken and Binance accounting for over 60% of the staked ETH.

RA Wilson, chief technology officer of crypto and carbon credits exchange 1GCX, told Cointelegraph that the Merge has enabled large holders of Ether to gain mass control of the network, making it significantly more centralized and certainly less secure and explained:

“Many ETH holders stake their crypto on centralized exchanges such as Coinbase, which allows these platforms to become dominant holders on the network, contributing to stakeholder centralization.”

The centralization aspect was quite evident right after the Merge, as 46.15% of the nodes for storing data, processing transactions and adding new blockchain blocks could be attributed to just two addresses.

Arcane Crypto analyst Vetle Lunde told Cointelegraph that while the PoS transition was important for Ethereum’s long-term goals of energy efficiency and scalability, one should be aware of the trade-offs:

“The largest validators being exchanges represent a potential long-term risk. Exchanges already find themselves in a difficult regulatory landscape, and precautionary rejections of transactions may conflict with one important core principle in the crypto ethos, censorship resistance.”

While Ethereum proponents claim that anyone with 32 ETH can become a validator, it is important to note that 32 ETH, or around $41,416, is not a small amount for a newbie or common trader, added to the fact that the lock-in period is quite long.

Slava Demchuk, CEO of Web3 complaint platform PureFi, told Cointelegraph that the centralization and complexities involved in staking would make centralized entities like Coinbase more powerful:

“Most people will be staking with custodians (such as Coinbase) due to the simplicity and the fact that they don’t have 32ETH. This way, large companies will have a majority share of the network, making it more centralized. It means that entities with more ETH will have more control.”

The fear of regulatory scrutiny

Earlier in 2018, the SEC claimed that Ether is not a security, owing to its decentralized development and expansion over time. However, that may change with the move to PoS, which has complicated the relationship between the Ethereum blockchain and regulators.

Gary Gensler, Chair of the United States Securities and Exchange Commission (SEC), testified before the Senate Banking Committee on the day of the Merge, stating that revenue from “expectation of profit to be derived from the efforts of others” would include proof-of-stake digital assets.

Gensler also mentioned that staking from large centralized exchanges looks “very similar” to lending, calling out high-yield products that caused the recent crypto market meltdown and lumping these products into the financial instruments under the scrutiny of the SEC.

Furthermore, in an SEC lawsuit filed just a week after the Merge, the SEC claimed jurisdiction over the Ethereum network as the majority of nodes are concentrated in the United States.

While the SEC’s claims raised some eyebrows and with many criticizing the regulator for its approach, some believe Ethereum has had it coming, as Gensler has already stated that moving to PoS could trigger securities laws. Ruadhan, the lead developer of PoW-based mining token developer Seasonal Tokens, told Cointelegraph:

“The argument that many of the validators are located in the U.S. is weak because it’s not even a majority. However, this move does show an intent to regulate, and it would cause a major disruption to the economy if Ethereum were to be classified as a security. Centralized exchanges would need to de-list Ethereum. The world economy is currently very vulnerable, and Ethereum’s market cap is so large that an event like this could have spillover effects and even cause an economic crisis.”

Ruadhan predicted that if Ethereum was classified as a security, then it would be much more heavily regulated regardless of how centralized it is: “If there are very few block proposers, all concentrated in the United States, then they can be forced to censor transactions that violate U.S. sanctions, which would mean that Ethereum’s censorship resistance is lost.”

Kenneth Goodwin, director of regulatory and institutional affairs at Blockchain Intelligence Group, told Cointelegraph that the move to PoS has certainly provided the SEC with leverage to oversee validators and even the nodes themselves as long as they are connected with a U.S. person, entity or jurisdiction. However, there is an irony to the situation. Goodwin explained:

“The irony here is that this could be one of the networks in consideration for the U.S. central bank digital currency given its central nature of it. On the flip side, there would be more regulatory oversight that may include creating a system of registration for validators and Ether protocol-based projects. Nevertheless, it seems as though the SEC is seeking to classify Ethereum as a security.”

Jae Yang, CEO and co-founder of noncustodial crypto exchange Tacen, told Cointelegraph that centralization could become a concern for Ethereum if regulators move to impose Anti-Money Laundering (AML) regulations on staking.

“Centralization will be a concern if the FinCEN or other regulators impose Know Your Customer, AML or other AML compliance requirements on users simply staking ether. Though a long shot at this point, there is a risk that centralized validators omit certain transactions, establishing themselves as the third-party intermediary on decision-making that goes against the very guiding principles of the decentralized financial system,” he explained.

Long-term impact of PoS transition

Despite concerns of over-centralization and regulatory scrutiny, industry observers are confident that the Ethereum blockchain will overcome these short-term issues and continue to play a key role in developing the ecosystem in the long term.

Okcoin chief operating officer Jason Lau advocated for an expanded view of the transition. He told Cointelegraph:

“When we think about the centralization vs decentralization debate, we need to look at the long-term. Open blockchains require a high level of decentralization to ensure censorship resistance, openness and security, so any shift towards more centralization would be worth keeping an eye on. The community is well aware of the importance of encouraging and ensuring a diverse set of participants, and we will see how this plays out over time.”

Wilson noted that the network may become slightly more decentralized over the course of the next 6–8 months, as lock-up periods on Ethereum begin to expire and holders will be able to withdraw their staked tokens.

And while node and validator centralization is a valid concern, Chen Zhuling, co-founder and CEO of noncustodial staking service provider RockX, noted PoW mining on Ethereum was as centralized as validators of the current PoS-based network.

Chen told Cointelegraph that in the PoW era, “Three mining pools dominated the Ethereum network’s hashrate. You could hardly compete with other miners to verify blocks if you didn’t possess an immense amount of computing power, requiring expensive, energy-guzzling mining rigs.”

Chen also advocated for a long-term view of the PoS transition as currently, tokens are mostly controlled by large foundations for the sake of security and on the goodwill assumption that they wouldn’t do anything to corrupt the network.

Demchuk was quick to point out that centralization in staking does not mean it will be easy for a large malicious group of stakers to potentially take control of the Ethereum network, as “there is an additional protective measure. ‘Bad’ validators will get slashed, meaning that their ‘stake’ can get confiscated.”

Ethereum might have transitioned to a PoS network, but a majority of scalability and other features will only arrive after the completion of the final phase, expected by the end of 2024.

Going ahead, it will be interesting to see how Ethereum overcomes the centralization of validators and addresses the growing regulatory concerns facing the network.

Apples and oranges? How the Ethereum Merge could affect Bitcoin

October 18, 2022 Coin Telegraph

Bitcoin Price

While the Ethereum Merge failed to move Bitcoin from a price standpoint, the industry believes we have yet to see the effects of its shift from PoW to PoS.

It’s been a month since Ethereum said goodbye to an essential feature its blockchain shared with Bitcoin (BTC). Called the Ethereum Merge, the long-hyped upgrade was widely celebrated, with the blockchain ecosystem. However, for the mainstream audience or even for the average trader, it felt more like a Star Wars Day celebrated by sci-fi geeks than an early Christmas.

As the Ethereum Merge occurred on Sept. 15, the most extensive blockchain ecosystem parted ways with the proof-of-work (PoW), the energy-hungry consensus mechanism that makes Bitcoin tick. The Ethereum blockchain now works on a more eco-friendly proof-of-stake (PoS) mechanism that doesn’t require any mining activities, leaving thousands of miners worldwide scratching their heads.

Price-wise, Bitcoin is yet to take a hit from the fundamental shift of its closest competitor. A whole month has passed since the Ethereum Merge, and the BTC price is still stuck between $18,000 and $20,000.

However, the overarching mainstream narrative of “Bitcoin should contribute to the world, not destroy it by depleting energy resources” is rekindled with Ethereum’s significant switch to a system that keeps blockchain alive with minimal resource consumption.

Ethereum avoided a dead end

Cointelegraph reached out to industry insiders to get a clearer picture of the Ethereum Merge’s impact on Bitcoin.

“PoW was a dead end for Ethereum,” says Tansel Kaya, a lecturer at Kadir Has University and the CEO of blockchain developer Mindstone, “Because an Ethereum network that doesn't scale can not live up to its promise.”

However, the Bitcoin community is not happy with the way its biggest price competitor took, according to Kaya. The BTC community often criticizes PoS for being vulnerable to censorship, he remarked, adding:

“If what [Bitcoin maximalists] say is true, Ethereum will either turn into a docile fintech network that is censored by governments, or a centralized structure like EOS, controlled by wealthy investors.”

Speaking to Cointelegraph, Gregory Rogers, CEO and founder of crypto-based gifting platform Graceful.io, noted that the Merge solidified the two distinct blockchains’ positions in the market. “Ethereum remains the transaction chain of choice with its increased speed and reduced fees,” Rogers said, adding, “Bitcoin is now the store of value of choice. They were already headed in this direction, but the Merge simply clarifies it.”

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From a price point, though, multichain marketplace UnicusOne founder and CEO Tashish Raisinghani believes that Bitcoin price will take a hit. “The crypto industry had a hard time because of macro-level challenges which resulted in the current bear market,” he said, adding that the Merge would make Ethereum more sustainable compared to Bitcoin, “Which hasn’t yet been able to recover from the Chinese mining crackdown in 2021.”

PoW is unrivaled in network security

Addressing the energy side of the argument, John Belizaire, CEO of eco-focused data center company Soluna Computing, told Cointelegraph that even though Ethereum’s switch to PoS could save energy, “It will also undermine the core decentralization aspect of cryptocurrency.”

Although Bitcoin’s PoW consensus mechanism is energy-intensive, it is also fundamental to the blockchain and “is the best choice for any cryptocurrency that prioritizes network security.”

Co-locating flexible crypto mining centers with renewable energy plants can help stabilize the electric grid, solve renewables’ wasted energy issue, and provide an abundant source of cheap energy to crypto miners, Belizaire added.

The Merge united crypto miners

Bitmain also brought down the prices of Antminers, its flagship crypto mining units, to help miners get back into profits, he added:

Despite the Merge, Ether (ETH) miners won’t simply forgo PoW mining just because Ethereum Classic (ETC) is not minted via mining anymore, according to Andy Lian, author of the book NFT: From Zero to Hero. Lian told Cointelegraph that the EthereumPoW (ETHW) project — the result of a hard fork after the Merge — is working hard and the miner community is more united than ever.

“These various factors helped the miners offset their operating costs in this bear market, keeping them alive.”

Joseph Bradley, the head of business development for Web3 service provider Heirloom, likened Bitcoin to “a global risk asset that is correlated to TradFi markets.” Bradley told Cointelegraph that, although Ether may be traded similarly, it still has neither the market depth nor the size that Bitcoin has. “Do we expect the world to become more or less chaotic in the coming years?” he asks rhetorically, answering:

“Most people would lean towards more chaotic. Security will matter during this time. Bitcoin will become even more important. Expensive energy will create innovation with miners — They will most likely move toward positioning Bitcoin mining as an extension of the electrical grid itself.”

Bitcoin and Ethereum: “Apples and oranges”

Not everyone agrees that the Ethereum Merge will have an impact on Bitcoin, though. Martin Hiesboeck, head of research at crypto exchange Uphold, dismissed a direct comparison between Ethereum and Bitcoin as “apples and oranges.”

Hiesboeck told Cointelegraph that Ethereum is basically a “company controlled by venture capitalists,” that’s why the transition to proof-of-stake aims to improve its economic and environmental credentials:

“Bitcoin doesn’t need to do that. Bitcoin is not a brand. Bitcoin is a computer network. Its output represents money. Nobody owns it. There is no brand. No CEO.”

Khaleelulla Baig, the founder and CEO of crypto investment platform Koinbasket, supported Hiesboeck’s argument, telling Cointelegraph that the Merge won’t have any meaningful impact on Bitcoin as these assets serve different purposes.

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Bitcoin’s purpose is “to prove itself as a superior store of value to fiat currencies,” according to Baig. The PoW mechanism goes well with the purpose of Bitcoin, “As it helps the network maintain the scarcity of 21 million BTC via its difficulty adjustment rate,” he added.

Bitcoin as a PoW and Ethereum as a PoS network are making significant contributions to the crypto-asset ecosystem by competing with their best features. Tansel Kaya summarizes: “Having two distinct approaches rather than one is more suitable for the spirit of decentralization.”

Proof-of-Stake