【Dapp Pocket】Ethereum 2.0 is about to launch: 4 things you must know!
Dear DeFi enthusiasts,
After much anticipation, the long-awaited Ethereum 2.0 (ETH 2.0) is finally about to launch! What exactly is ETH 2.0? Why is it important? And how can you participate in mining?... This week, our discussion will focus on these topics.
Other headlines this week include: MetaMask Swaps launches on Chrome extension; Circle introduces short-term and medium-term high-yield USDC corporate accounts with rates up to 10.75%; and the synthetic asset issuance platform Synthetix experiences its first liquidation, and more.
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This week, industry experts have selected seven pieces of advice from Compound's Robert Leshner for newcomers in the crypto space; Bankless' Ryan Sean Adams compares Ethereum to a Tesla sports car; and Ethereum's Vitalik warns about the risk of nodes failing during staking, which isn't as terrifying as it sounds!
Table of Contents
Our Viewpoint
Ethereum 2.0 is about to launch, here are 4 things you need to know!
Why is ETH 2.0 so important?
To answer this question, we first need to understand the essence and pain points of the Ethereum ETH blockchain. The core value of the Ethereum blockchain is to aim to be a world computer for calculating, processing various data and transaction information worldwide, and using decentralized distributed information storage. However, while decentralized operation ensures security, computational efficiency is much lower than traditional servers. As for Ethereum currently, it can process about 30 transactions per second, while large exchanges can process tens of thousands per second. The low operational efficiency directly leads to low scalability, which is why when DeFi was popular, the gas fees for each on-chain transfer skyrocketed to 300-400 gas, as the limited transactions that can be processed within a unit of time required users to compete and pay higher fees to have their transactions confirmed faster.
How does ETH 2.0 save the blockchain world?
Sharding Technology
One of the key points of Ethereum 2.0 is the implementation of sharding technology. After Ethereum completes the sharding upgrade, the transaction volume of the ETH blockchain can reach up to 100,000 transactions per second, which is the rate of large exchange servers, and can even reach a level of computational power required for non-financial applications like IoT! Compared to the daily trading volume of U.S. stocks and Ethereum, this is the necessary foundation for the cryptocurrency financial market to reach "mainstream" market traders.
Proof of Stake Consensus Mechanism
At its inception, Ethereum chose the same PoW proof-of-work consensus mechanism as Bitcoin. However, this mechanism requires miners to consume huge amounts of electricity to produce blocks, which can lead to a crisis of insufficient blockchain computing power when the coin price drops. The PoS used by Ethereum 2.0, on the other hand, only requires miners to deposit a certain amount of Ether into nodes to produce blocks. Not only does this significantly reduce the cost of mining, but the introduction of the Safeguard mechanism also significantly increases the difficulty of malicious behaviors like 51% attacks, making ETH 2.0 not only more energy-efficient but also more secure.
How to participate in Staking? What are the risks and rewards?
Users holding 32 Ether can directly register as a Validator on the Eth2 Launch Pad, set up nodes, etc. The website provides step-by-step instructions and precautions, but it is important to note that the computer running the node must be operational for over 60% of the time to earn the full Staking rewards.
Users with less than 32 Ether cannot become a node themselves, but can join Staking Pools like Rocket Pool to combine their funds with others to meet the staking threshold.
Staking rewards are related to the number of users participating in staking. As more users stake, rewards gradually decrease. Currently, the expected return is approximately 5.26% APR. However, users should consider that staking requires locking up funds for over 18 hours, and during periods of price decline, the returns may not offset the price drop. Small users should also carefully choose staking pools to avoid the risk of platform operators running away or being hacked.
How will ETH 2.0 impact DeFi?
The decrease in transaction costs and increase in block production capacity will benefit Ethereum's most popular application, DeFi, the most. Besides reducing mining fees, when smart contracts can be integrated into Sharding Chain, the scalability of DeFi projects will experience an unprecedented explosion, potentially changing the direction of DeFi development even further.
If we simply look at transactions per second, currently the largest e-commerce platform Amazon had about 60-100 transactions per second in 2019, and Paypal had 50-100 transactions per second. This was unimaginable for ETH 1.0, but with ETH 2.0's scalability of up to 100,000 TPS, this is no longer a problem. In other words, DeFi's current mainstream development direction of lending and exchanges may expand into more traditional financial or related industries, such as e-commerce, payments, and more.
Conclusion
With the current estimated schedule, Phase 1 is expected to go live as early as December 1st, with 64 Sharding Chains meaning the maximum transaction volume per second increases by 64 times compared to the past. Phase 1.5 is expected to be completed in 2021, where the mainnet will have sharding mechanisms and PoS. Between 2021 and 2022, Phase 2 is expected to be completed, which will see the full integration of smart contracts and Sharding. Smart contracts are known to be the core role of DeFi projects, therefore, if you are expecting ETH 2.0 to bring a comprehensive upgrade to the fundamentals of DeFi, you may need to wait another year or two conservatively.
Weekly Highlights
✨ Headlines of the Week
Ethereum 2.0 Deposit Contract Launched for 5 Days, Completion at Around 10%
According to Ethereum Foundation data, the ETH 2.0 deposit contract has accumulated about 50,000 ETH in the first 5 days of opening, compared to the target of 524,000 ETH, the current completion rate is about 10%. ETH 2.0 needs to meet the minimum ETH deposit amount for activation 7 days before December 1st for the network to launch on that day.
Circle Introduces Short to Medium-term USDC High Yield Corporate Accounts, with Rates Up to 10.75%
Circle, the issuer of the second-largest stablecoin USDC, announced the launch of high-yield corporate accounts and APIs, allowing enterprises and their customers to enjoy 8.5%-10.75% interest on USDC savings/fixed deposits. USDC's total market value has surged from 460 million to 2.87 billion in the past year, making it the strongest performing stablecoin of 2020.
MetaMask Swaps Launched on Chrome
MetaMask has launched a service that allows users to trade directly within Chrome extension, MetaMask Swaps, integrating multiple aggregators (such as Uniswap, Airswap, Kyber, 0xAPI, 1inch.exchange, and private market makers), allowing users to trade with the deepest liquidity pools in the DeFi ecosystem at the best prices.
Synthetic Asset Issuance Platform Synthetix Experiences First Liquidation
DeFi synthetic asset platform Synthetix recently experienced its first liquidation since going live. According to liquidation rules, if the value of SNX tokens collateralized by users falls below 200% of the excess collateral, it triggers liquidation. As many users' focus is on Synthetix V2, there was not sufficient warning provided before the liquidation, leading to some dissatisfaction among V1 users whose assets were liquidated.
🚀 DeFi Protocols
PoolTogether's first community vote has started, allowing ticket holders to participate
Binance Innovation Zone launches cross-chain protocol HARD Protocol
💵 DEX (Decentralized Exchanges)
1Inch V2 goes live, introducing features such as API upgrades, reduced Gas Fees, and more
CoFiX's 24-hour trading volume exceeds $36 million, surpassing Curve to temporarily rank fourth
🛠 Liquidity Mining
Decentralized synthetic asset protocol UMA announces the launch of "Developer" mining
Ethereum NFT project Alpaca City launches mining functionality on November 8th
🏛 Government and Financial Institutions
Insights from Industry Experts
Compound Founder Robert Leshner: Here are some suggestions I have for friends who have not experienced the crypto bubble...
Bankless advocate Ryan Sean Adams: Bitcoin is like a heavy truck, Ethereum is like Tesla
Ethereum Founder Vitalik Buterin: If you are worried about abnormal network or computer behavior during staking, there is no need to be too nervous
Data Indicators
This week's data is from 2020/11/03 ~ 11/09. TVL (Total Value Locked) indicates how much assets are stored on the platform; IPY (Interest Per Year) is the current lent funds * annual interest rate, i.e., the platform's annual interest income. Data source: DeFi Pulse. (Unit: million USD)
Memes
The growth of @ethereum in the next decade will be epic.💪🤓🤙 #eth2 pic.twitter.com/qKHDboEWkt
— wolfofethereum.eth 🐬🆙️ (@Crypto_Wolf_Of) November 6, 2020