Breaking down Ethereum’s evolution and its impact on crypto markets Was this newsletter forwarded to you?Sign up here. |
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(As of August 23, 2022 @ 21:37:21 UTC. ETH price % change over 24 hours.) |
Welcome to Valid Points! Ethereum is finally set to embark on its long-awaited transition to proof-of-stake. With this major update slated to happen sometime next month, controversy and questions abound around what will happen to the deprecated proof-of-work network post-Merge. In this week’s edition of Valid Points, we’ll explore the growing movement to keep Ethereum's old consensus mechanism alive. How should Ethereum PoW “forks” be viewed by ETH holders? – Sam Kessler |
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Ethereum Classic In 2016, Ethereum’s community was in crisis. An exploiter ran away with around 5% of all ether (ETH) in circulation, and the nascent ecosystem was gripped by controversy: How should Ethereum proceed? The result was a “hard fork” – a backwards-incompatible code change that created a new instance of the network – one where token balances were adjusted as if the infamous “The DAO exploit” never happened. But not everyone was on board. A subset of anti-fork purists – along with some of Ethereum’s chief trolls and detractors – continued to operate the old, hack-tainted chain under the moniker of “Ethereum Classic.” The spin-off chain was hollowed out of its community, but it nonetheless vied with its sister network to be the true heir to theEthereum throne. And it may have gotten close to its goal: ETC, the version of ether (ETH) on the Classic network, briefly seemed like it might flip ETH in value. Ethereum Classic’s bid for blockchain dominance ultimately failed, but it nonetheless set the stage for years of grifts, confusion and debate. And now, history repeats. On Sept. 15 (or thereabouts) Ethereum will finally, at long last, they swear this time, initiate its transition to a proof-of-stake (PoS) system. The much-postponed upgrade, which has been on Ethereum’s roadmap since its inception, will dramatically cut the chain’s carbon footprint in favor of a new system that proponents hope will also make the network more secure. But not everyone is excited for PoS. Some of Ethereum’s miners – those who run computers to process and validate transactions on the current proof-of-work (PoW) network – plan to keep the old network up and running. Read more: Who Will Mine Ethereum After It’s Gone? Without Ethereum’s users and core developers, this forked network will be a crypto “uncanny valley.” It will look and feel like Ethereum, but it will only be a skeleton of the real thing, with apps and tokens floating around without usage or value. Things will break. Grifters will grift. But the movement behind a forked PoW Ethereum appears inevitable. Read the full story here. |
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The following is an overview of network activity on the Ethereum 2.0 Beacon Chain over the past week. For more information about the metrics featured in this section, check out our 101 explainer on Eth 2.0 metrics. |
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Disclaimer: All profits made from CoinDesk’s Eth 2.0 staking venture will be donated to a charity of the company’s choosing once transfers are enabled on the network. |
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Client diversity on Ethereum’s consensus layer has improved. WHY IT MATTERS: Earlier in the year, consensus client Prysm was used by more than 66% of all Beacon Chain validators, but now Prysm accounts for 37.89% of validator market share, according to data provided by Sigma Prime’s Blockprint. Currently, 33.36% of all validators use consensus client Lighthouse, 15.71% of validators use Teku, and 12.99% of validators use Nimbus. Client diversity is critical for a resilient network; with increased client diversity, the network becomes more decentralized. Read more here. Uniswap blocked 253 crypto addresses allegedly linked to stolen funds or to Tornado Cash. WHY IT MATTERS: The decentralized exchange is complying with U.S. Treasury Dept. sanctions and is blacklisting 253 addresses known to be linked to sanction violations, according to GitHub data cited by Yearn Finance developer “Banteg.” Even though the blocked crypto addresses cannot use the Uniswap website, the addresses can continue to use Uniswap’s smart contracts, a decentralized service that exists on the Ethereum blockchain. Read more here. Coinbase faces a putative class action lawsuit. WHY IT MATTERS: Filed in the U.S. District Court for the Northern District of Georgia, the class action lawsuit against the crypto exchange alleges that Coinbase failed to properly secure customers’ accounts, leaving them vulnerable to theft and unauthorized transfers. The Georgia lawsuit represents a class of more than 100 people. The recent lawsuit is not unique as Coinbase is facing a string of lawsuits from unhappy investors. Read more here. Sepolia becomes the first Ethereum testnet to get a post-merge upgrade. WHY IT MATTERS: Sepolia, an Ethereum test network that successfully merged with its proof-of-stake beacon chain on July 6, went through an upgrade on its Execution Layer at block 1,735,371. Parithosh Jayanthi, a DevOps engineer at the Ethereum Foundation, told CoinDesk that “the upgrade is there just to clear up any dead nodes in the system.” Upgrades to Ethereum test networks – even small ones – are important steps in ensuring that the new proof-of-stake protocol runs smoothly. Read more here. FTX posted 1.02 billion in revenue last year, jumping 1,000% from $89 million in the prior year. WHY IT MATTERS: FTX also posted net income of $388 million in 2021, up from just $17 million in 2022. The bulk of FTX’s revenue comes from derivatives trading, while about 16% came from crypto spot trading in 2021. The report gives a window into the revenue generated by one of the larger, privately held crypto exchanges. Read more here. |
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Valid Points incorporates information and data about CoinDesk’s own Eth 2.0 validator. 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. Search for it on any Eth 2.0 block explorer site! |
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