Hashquark CEO Li Chen talked about the new opportunities and challenges of the cryptocurrency industry after the launch of Ethereum 2.0.
Original title: “Distributed Roundtable 6th HashQuark Leo: Analysis of ETH2.0 and the new pattern of the industry in the future”
Interviewee: Li Chen, CEO of HashQuark
After nearly a year of speculation in the cryptocurrency market on December 1, “ETH2.0” finally ushered in the moment of launch. So, what exactly can ETH2.0 bring to Ethereum and the cryptocurrency market? What new patterns will emerge in the future? Recently, Fenbushi Capital invited Leo of HashQuark to talk about ETH2.0.
Li Chen, CEO of HashQuark
Sue: On December 1st, the ETH2.0 beacon chain was launched, indicating that Ethereum has taken an important step. LEO, what do you think of this process of Ethereum?
Leo: We must first understand why ETH2.0 is needed. It is because ETH1.0 has many mechanisms that need to be optimized, and it can only be optimized from the bottom layer, so ETH2.0 is available. ETH is to be a world computer. The biggest difference between it and Bitcoin is that it supports smart contracts and also gave birth to the DeFi ecosystem.
You may complain that there are many problems in DeFi, but this is not necessarily the problem of DeFi itself, and may be caused by ETH1.0. The first problem is that DeFi is very slow to use , and gas fees are particularly expensive when congested. The second problem is that the capacity of ETH1.0 is limited . We see that most of the business cannot be moved to the blockchain, and many things can only be combined on and off the chain. The third problem is the chain reaction brought by its PoW mechanism . Because of the performance of PoW, lightning loans can lend a lot of money in a block, and then manipulate the oracle to instantly pull the token price very low or high. Profit. With very low cost can get high benefits. In ETH2.0, the PoW mechanism was converted to the PoS mechanism, which solved the problem caused by the slow block generation of the PoW mechanism, and the lightning loan problem was naturally solved.
Ethereum is a blockchain with historical accumulation. At present, the biggest challenge ETH2.0 faces is to move the applications on ETH1.0 to 2.0. At the same time, the contract operation cannot be stopped and the accounts cannot be recorded wrong. Without these accumulations, starting from a blank sheet of paper would be much easier, which is also a huge challenge.
So ETH2.0 is divided into four phases (phase0, phase1, phase1.5, phase2). The launch of the beacon chain is only the first step in the long march. The upgrade of ETH2.0 will eventually be completed, but the challenge is unprecedented.
Sue: Leo, it is said that ETH2.0 will not be commercially available until 2020. What impact will ETH1.0 have during the ETH upgrade?
Leo: There are only two core issues, one is interest and the other is consensus. ETH2.0 will definitely produce new benefits and consensus patterns, which can be discussed from different angles.
In Phase0, a small amount of ETH1.0 will be converted to 2.0, but due to the long lock-up time of staking (need to wait for ETH2.0 to start the transfer), it is expected that there will be no major fluctuations in the market. It is necessary to wait until the transfer is started, and there is ETH2 in the market The price of .0 will see the specific impact on ETH1.0.
2.0 is friendly to developers. Developers will slowly migrate to 2.0, which will also take away some 1.0 users (people who actually use Token), which will have an impact on the original community. By the time of Phase 1.5, since the ecology of ETH 2.0 has been initially established and the performance has been greatly improved, most developers and related users will choose to migrate to ETH 2.0.
On the other hand, because of the cost and income of the mining machine, it is not ruled out that if miners still use ETH1.0, a fork may occur . Another is to directly expand Layer 2 on ETH1.0, which is very likely to happen, but it depends on the quality of these Layer 2 solutions. Since the complete upgrade of ETH 2.0 is a relatively slow process, the impact on ETH 1.0 is a subtle long-term event.
Sue: Is it possible that ETH2.0 will encounter a black swan event during the upgrade process? Can you analyze the potential risks of ETH2.0?
Leo: First of all, the biggest potential risk of ETH2.0 is not the technical risk, but that it has not experienced the test of time. Although ETH1.0 has a high rate and slow speed, it is extremely stable and error-free. ETH1.0 has undergone several waves of pressure and security tests, such as the ICO boom in 2017 and the DeFi boom this year. During these processes, a lot of experience has been accumulated and a large number of vulnerabilities have been fixed. Now ETH1.0 has become a “copper wall, iron wall, and unbreakable”. Up. ETH1.0 has experienced strong winds and waves, while ETH2.0 has not experienced it, and other public chains except BTC have not experienced it. This is like a website that says its technology is very good. It has not experienced special events such as buying and buying on Double Eleven and grabbing train tickets during the Spring Festival. It is difficult to truly be absolutely stable and safe. After all, these real conditions cannot be simulated in a technological environment.
The second point is the risk of the main network operation , such as the value of the token and the risk of the profit model. The pledge income of ETH2.0 on December 1st is 16% per annum. Whether this is reasonable or not, the pledge yield adjustment model will also need to be tested after the mainnet is launched. And whether it can be upgraded on schedule, if a relatively large delay is generated, it will affect ETH2.0.
The third is ecological risk . For example, can wallets, browsers, etc. support ETH2.0 better? Are there relatively complete development tools and tutorials, etc., and are there enthusiastic evangelists to promote and educate the community, can ETH2.0 gain popular support? Time is needed for ecological construction and accumulation.
Sue: Potential opponents of ETH2.0 in the future include Polkadot/DFINITY, etc. Which public chains are you optimistic about in the future? Make an assumption: Will ETH2.0 be overtaken by other public chains during the upgrade process?
Leo: During the period from phase0 to phase2, ETH2.0 may be overtaken by other public chains. Among the projects you listed, we are more optimistic about Polkadot. In fact, ETH has encountered similar challenges before. As early as 2017, EOS had challenged ETH, claiming that it was a killer of Ethereum, but it ended in coolness. Until now, none of the public chains that once claimed to be an “Ethereum killer” can surpass ETH.
So, what kind of public chain can achieve corner overtaking? I will now enumerate the characteristics of a good public chain. First , the underlying technology is reliable , and the code in this area is everything, which is easier to see; second , the public chain has leaders . In fact, the public chain is not just a bearer of technology, it is more like an economy. The leader of the public chain needs not only a personality, but also a wide range of influence. Looking at several influential public chains, there are opinion leaders: EOS has Daniel Larimer, Polkadot has Gavin Wood, and ETH has Vitalik. Each public chain uses opinion leaders to first harvest iron powder, and then build communities through iron powder. The third is the developer . Only a public chain where developers gather can have long-term development. For example, EOS’s technology is great, but the only problem is that it cannot gather developers, making the public chain useless. On the contrary, the reason why Ethereum is popular is that good business models and applications are bred from Ethereum: DeFi projects such as Uniswap and Compound. And these all come from the developers of Ethereum.
However, Rome was not built in a day. For the Ethereum killer, it was an arduous task. It needed to be particularly good in every aspect without obvious shortcomings. In the world, there are too many systems more advanced than Windows. Why do people only recognize and use Windows systems?
Sue: Under the wave of ETH2.0, will there be a new pattern? How should blockchain companies and institutions face opportunities or challenges?
Leo: There is no doubt that public chain competition will heat up. Those public chains also know very well that after Phase 1.5 of ETH2.0, if they do not have an advantage over Ethereum, there will be fewer opportunities later. The time window left for the “Ethereum Killers” discussed above is only one and a half to two years. Therefore, the public chain competition in the past two years will be more exciting.
Because of the technical difficulty of ETH2.0, there must be a transition plan during the upgrade process, that is, Layer 2. Therefore, most investment institutions will study Layer 2, and there will be a large number of startups doing Layer 2 things. The mature Layer 2 technology will bring new opportunities to DeFi/NFT/DAO.
In addition, because of the rapid development of public chains and the arms race, the direction of blockchain services also has great potential, such as staking infrastructure, such as DeFi infrastructure, such as security.
Sue: What did HashQuark do during the ETH2.0 upgrade process?
Simply put, our first step is Ether Pocket Pro, which provides institutional-level ETH 2.0 token pledge services. The pledge of ETH2.0 is very challenging. First , the technical cost of building this node is extremely high. First, you have to create a 2.0 address and put ETH1.0 into the contract with parameters. Each node can only be used to number 32. In addition, you also need to maintain the node’s health at all times. This series of operations poses great challenges to users. Second , the pledge of ETH2.0 is different from that of other public chains (non-voting form), and it needs to be carried out in the form of token transfer into a contract, thus facing the problem of token custody. Third , ETH2.0 pledge has the risk of Slash. If you do not upgrade in time or the Key is stolen, the ETH you pledge will always be fined. We see that some nodes have been slashed. And our Ether Pocket Pro can solve the above pain points for users and provide institutional-level services.
Next, we will launch Ether Pocket to solve the problem of staking liquidity. The lock-up period of ETH2.0 is not fixed, and users will pay a certain liquidity cost. Ether Pocket solves this problem.
On the first day when ETH2.0 went online, HashQuark completed staking of tens of thousands of ETH. We found that 2,000 nodes were fined for failing to produce blocks in time on the first day of launch. Some nodes do not know that they only need to charge 32 ETH, and often charge multiples of 32, but they can only get the pledge income of 32 ETH.
Staking of ETH2.0 is a matter of effort and long-term maintenance. From various perspectives, third-party institutions like HashQuark have natural advantages for ETH2.0 staking services.
