Why do people participate in the launch of the ETH2.0 beacon chain mainnet? What impact will the launch of the ETH2.0 beacon chain have on the current market?
Author: Blue Fox Notes
With the release of the ETH2.0 storage contract, the market’s interest in ETH is gradually increasing.
ETH2.0 storage contract released, etherscan
The Beacon Chain mainnet of ETH2.0 is planned to be launched on December 1. In order to start, the storage contract requires a minimum deposit of 524,288 ETH (16,384 validators). As of the time of writing, Blue Fox has pledged 39,973 ETH, including the 3,200 ETH deposited by Vitalik, the founder of Ethereum. According to the current market value, it is close to 1.5 million U.S. dollars, and the overall minimum required deposit of ETH is about 250 million U.S. dollars.
Vitalik deposits 3200ETH into the storage contract, etherscan
Minimum pledge requirement for ETH2.0 mainnet launch, ethereum.org
Why do people participate in the launch of the ETH2.0 beacon chain mainnet?
One of the most important reasons is that it is expected to obtain stable returns with relatively low risks. If only 524,288 ETH is deposited, then its APR income can reach 21.6%; if the pledged ETH reaches 2,450,000, its return rate can reach 10%; even if the locked ETH is as high as 10,000,000, its APR income can also reach 4.9%, far higher than the ETH storage revenue of other DeFi protocols.
The relationship between the amount of ETH pledged tokens and the expected return, ethereum.org
APY of Aave’s ETH lending market, Aave
ETH aggregation mining on YFI APY, Year
APY of the ETH lending market on Compound, Compound
Currently, the number of Ethereum addresses holding more than 32 ETH is about 13%, and a total of 524,288 ETH needs to be deposited 7 days before the launch on December 1. If the start-up requirement cannot be met, it will be started 7 days after meeting this requirement. We can see the development of ETH deposit in the next two weeks.
In addition, it should be noted that the annualized rate of return of ETH pledge is calculated in ETH, not USD. This means that as the price of ETH increases, its actual APY may be higher than the current rate of return. Incentivize more people to pledge ETH and earn more ETH.
Of course, there will also be certain liquidity problems. After depositing ETH into the storage contract, ETH cannot be withdrawn, which will cause liquidity problems. Of course, there are also some projects dedicated to helping ordinary users solve this problem, such as RPL (Rocket Pool).
Does the launch of the ETH2.0 beacon chain have any impact on the current Ethereum PoW chain?
According to the past iteration history of Ethereum, it may take several years to complete the transition from PoW to the PoS chain. Therefore, both chains will coexist for a long time. So, what does this mean for ETH holders? What needs to be done?
If the current Ethereum chain token is called ETH1, and the token on ETH2.0 is called ETH2, what is the relationship between the two? (Blue Fox Note: Some people call ETH2 BETH, which means ETH on the Beach Chain)
First of all, when the PoW chain transitions to the PoS chain, in the end, both ETH1 and ETH2 will run on the ETH2.0 network. In the end, there is only one ETH.
However, for now, ETH1 and ETH2 are tokens on two different chains. After the launch of the beacon chain, there will be a transition period between the two Ethereum chains. Users deposit ETH into the storage contract and can get ETH2 token incentives through the ETH2.0 network. With the stability of the ETH2.0 network, ETH1.0 will gradually become a shard of ETH2.0.
In other words, ETH2.0 is not a hard fork of Ethereum, so there will be no fork tokens, and current ETH (ETH1) holders will not get two assets. For example, in the history of Bitcoin, the BCH hard fork, users who owned btc at that time would get the same amount of BCH. Since ETH2.0 is not a hard fork, there is no free candy.
The ETH1 token comes from the current Ethereum PoW chain, and the ETH2 token is generated through the PoS mechanism after the ETH2.0 Beacon Chain network is launched (there are no transfers and smart contracts, etc.). When the ETH2 token is launched, ordinary users can choose Keep ETH1 tokens, or choose to convert their ETH1 tokens to ETH2 tokens, but from the current point of view, due to liquidity reasons and one-way exchange reasons, most users may not choose to convert their ETH1 to ETH2. If conversion is really needed, subsequent exchanges or wallets can help users complete the conversion.
In short, for ordinary users, after ETH2.0 goes online, there is no need to worry about their ETH assets, nor do they need to worry about the future exchange of ETH1 and ETH2.
The impact of the launch of ETH2.0 on DeFi
The launch of ETH2.0 is not only beneficial to the long-term development of ETH, but also beneficial to the development of its DeFi ecosystem. The launch of Ethereum 2.0 has brought certain expectations for the scalability of Ethereum in the future. Of course, if ETH2.0 does not progress smoothly, it will also have an adverse impact on the ETH and DeFi ecosystem.
The compound effect of the two carriage start
The current demand for Bitcoin has exceeded the output by at least twice, as shown in the following figure:
Bitcoin demand exceeds output, TheBlock
Bitcoin’s halving effect is gradually emerging. At the same time, the launch of the ETH2.0 storage contract will also lock up a large amount of ETH in the future. Assuming that at least 2.5 million ETH is deposited in the Ethereum pledge contract and the APY is around 10%, then this will be at least locked ETH worth more than $1 billion.
The halving effect of Bitcoin and the pledge effect of ETH will gradually show in the next few months to a year. For this point, you can also refer to the article ” Bitcoin’s halving effect and the pledge effect of ETH2.0 ” by Blue Fox Notes a few days ago.
When the two carriages of Bitcoin and Ethereum are launched, they may show different market characteristics from the beginning of 2017. Not only Bitcoin will become the protagonist, but ETH and mainstream DeFi may also have a bright moment. As for how to evolve, it will gradually bloom in the next few months to a year. Of course, the ups and downs during this period are also essential, which is also the normal state of the market.
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