ETH 2.0

Ethereum co-founder Joe Lubin says no chance ETH is classed as security

The ConsenSys founder and Ethereum co-founder said it’s as unlikely as ride-sharing service Uber becoming illegal.

Ethereum co-founder and crypto entrepreneur Joseph Lubin is confident that Ether (ETH) won’t be classified as a security in the United States.

Cointelegraph spoke with Lubin, Ethereum co-founder and founder of blockchain tech firm ConsenSys, in Tel Aviv at the Web3 event, Building Blocks 23.

Asked if ETH could be classed as a security in the U.S. after Ethereum’s transition to a proof-of-stake (PoS) consensus model, Lubin said:

“I think it’s as likely, and would have the same impact, as if Uber was made illegal.”

“There would be a tremendous outcry from not just the crypto community but different politicians and certain regulators,” he added.

In September, Securities and Exchange Commission Chairman Gary Gensler suggested that the blockchain’s transition to PoS might have brought ETH under the regulators’ beat.

Gensler believed staking coins gave “the investing public” anticipation of “profits based on the efforts of others.”

Lubin said he was privy to discussions with the SEC and the Commodity Futures Trading Commission “for many years.”

*Joseph Lubin speaking with Cointelegraph at Building Blocks 23 in Tel Aviv, Israel in February.*

He said around five years ago the regulators were “just trying to wrap their heads around what tokens were.”

“They thought back then that everything was a security. We — I think — helped them significantly understand lots of tokens are not securities, and then they went away and Gary and team now think almost everything’s a security.”

Lubin, however, believes that ETH continues to be “sufficiently decentralized” and pointed to its “many use cases that don’t implicate it as a security.”

“There is no centralized set of promoters or builders that is specifically trying to raise the value of Ether and enrich investors,” he added.

“There’s a court system in the United States of America that I think would be supportive of arguments that would be made that it is not.”

Lubin said that regulators appear to be more focused on another aspect of Ethereum at the moment, noting that people he knows close to the action in Washington D.C. say “most of the focus is on stablecoins right now.”

“Everybody’s talking about it, freaking out. Calling for things to be done.”

In a Feb. 9 Twitter thread, Coinbase founder and CEO Brian Armstrong responded to “rumors” that the SEC was thinking to ban retail consumers from staking crypto.

“Staking is not a security,” he said, adding it would be a “terrible path for the U.S.” if a staking ban was passed noting it was “a really important innovation in crypto.”

“Hopefully we can work together to publish clear rules for the industry, and come up with sensible solutions that protect consumers while preserving innovation,” Armstrong said.

Ethereum risks another 10% drop versus Bitcoin as $15.4M exits ETH investment funds

Macroeconomic factors and centralization concerns are putting pressure on Ethereum’s price post-Merge.

Ethereum’s Merge on Sep. 15 turned out to be a sell-the-news event, which looks set to continue.

Notably, Ether (ETH) dropped considerably against the U.S. dollar and Bitcoin (BTC) after the Merge . As of Sept. 22, ETH/USD and ETH/BTC trading pairs were down by more than 20% and 17%, respectively, since Ethereum’s switch to proof-of-stake (PoS).

*ETH/USD and ETH/BTC daily price chart. Source: TradingView*

What’s eating Ether bulls?

Multiple catalysts contributed to Ether’s declines in the said period. First, ETH’s price fall against the dollar appeared in sync with similar declines elsewhere in the crypto market, driven by Federal Reserve’s 75 basis points (bps) rate hike.

Second, Ethereum faced a lot of flak for becoming too centralized post-Merge.

Only five entities have produced 60% of the blocks so far. The biggest share belongs to Lido DAO , an Ethereum staking service, that has 4.19 million ETH deposited, or over 30% of the total amount staked into Ethereum’s official PoS smart contract.

*ETH 2.0 total value staked by provider. Source: Glassnode*

Third, institutional investors, or “smart money,” also reduced exposure to the Ethereum-focused investment vehicles in the day leading up to and after the Merge.

Ethereum funds witnessed $15.4 million worth of capital outflows from their coffers in the week ending Sept. 16, according to CoinShares’ weekly report. In contrast, Bitcoin-based investment funds attracted $17.4 million in the same week, suggesting capital migration post-Merge.

Lastly, Ether also felt extreme selling pressure from its proof-of-work (PoW) miners, who sold $40 million worth of Ether in the days leading up to the PoS update.

Independent market analyst Tuur Demeester noted that Ether could continue its decline versus Bitcoin in the coming days, citing ETH/BTC’s previous reaction to key events in the Ethereum market, as shown below.

*ETH/BTC price performance around key Ethereum events. Source: TradingView*

The chart shows Ether traders’ practice of pumping ETH against Bitcoin ahead of adoption-related narratives, such as nonfungible tokens (NFTs) and the decentralized finance craze of 2021, and the initial coin offering ( boom of 2017 .

All of these rallies fizzled out once the hype subsided. Demeester highlights Ethereum’s switch to PoS as a similar hype phase that pushed ETH/BTC higher in 2022, expecting the pair to undergo a deep correction in the coming weeks.

“I expect ETH/BTC to break down violently at some point,” he said, adding:

“ETH is a ticking time bomb.”

ETH/BTC technicals hint at 10% drop ahead

Placing these fundamentals against Ether’s technicals versus Bitcoin presents a similarly bearish setup.

On the three-day chart, ETH/BTC has dropped by nearly 25% after topping out at 0.085 BTC, a level that coincides with its long-serving resistance level of 0.081 BTC.

Now,the pair eyes an additional drop toward its multi-month ascending trendline support, as illustrated below.

*ETH/BTC three-day price chart. Source: TradingView*

The trendline support falls in sync with 0.06 BTC, a level that has served as a pullback zone in 2022. In other words, another 10% decline is on the table.

ETH/USD’s bearish setup is worse

Against the dollar, Ether could decline by as much as 45% due to what appears to be an ascending triangle pattern in a downtrend.

*ETH/USD three-day price chart featuring ‘ascending triangle’ pattern. Source: TradingView*

As a rule, the bearish continuation pattern resolves after the price breaks below its lower trendline and then falls by as much as its maximum height. Hence the bearish target sits near $700 by the end of this year, down 45% from Sept. 2’s price.

Conversely, a pullback from the triangle’s lower trendline could have Ether rise toward the upper trendline, which means a rally toward $1,775, or a 35% gain from current price levels.

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.

Lower costs, higher speeds after Ethereum’s Merge? Don’t count on it

There’s a lot of hype surrounding Ethereum’s Merge. But in reality, most users aren’t going to notice much change.

As we approach the date of Ethereum’s Merge, users have speculated about what it will mean for projects and the wider ecosystem. Some argue the Merge will have little impact on gas fees and believe transaction speeds might improve.

However, in general, most ordinary users will not notice much change. The real changes for average users will only be seen after the sharding mechanism is introduced six months later.

The Merge will reduce energy consumption and increase security

The Merge is a planned update to the Ethereum network scheduled for Sept. 15. It will move transaction validation from proof-of-work (PoW) to proof-of-stake (PoS). PoS has been part of Ethereum’s plans for many years, but the level of technical sophistication it requires has taken time to develop. It means a transition from miners being responsible for validating blocks to the staked owners of ETH.

This will have several major significant long-term consequences. Firstly, it will mean a huge reduction in the amount of electricity used by Ethereum (as much as 99.9%). While PoW is a highly effective means of validation, it has been shown to use the same amounts of electricity as whole countries, meaning it is highly detrimental to the environment.

Under PoS, validators will only need to stake 32 Ether (ETH). The switch will also mean an increase in security. This is because it decreases the danger of a 51% attack (required to take over the network), which is more likely on a PoW system. On a PoS system, the risk of launching an attack is the staked ETH — as opposed to electricity cost on PoW — so there is an inherent penalty for failure.

Whereas a failed PoW attack results in the loss of electricity costs, slashing a validator’s stake is the PoS equivalent of a miner burning down an entire PoW server farm in a failed attack. The economic incentive reduces significantly. The Merge will also ultimately level the playing field economically.

Don’t expect better speed or lower gas fees

Despite the fact that, at the moment, the Merge does not require huge amounts of action from the projects themselves. However, there is still the question of how the Merge will affect the users of the projects.

Many users hold certain assumptions and guesses about how the system will change after the Merge. But in fact, many of those assumptions are wrong.

Little impact on gas fees

The Ethereum Foundation, the organization behind the Ethereum blockchain, has asserted the Merge will have little impact on gas fees. This means that gas fees will remain relatively high, depending on the demand and supply of computation power.

*Ethereum average transaction fee YTD. Source: BitInfoCharts*

Improved speed

The claim that transaction speeds will be improved has been repeatedly denied by Ethereum core developers. They argue that it depends on the app that utilizes the blockchain and not the chain itself.

High NFT fees

To create a new nonfungible token (NFT) on the Ethereum network, you’ll have to pay a transaction fee. However, the switch from Ethereum’s current PoW consensus algorithm to its upcoming PoS system won’t affect NFT minting fees.

Rewards from staking

Those who have staked their crypto will find that the rewards will remain locked. These will be locked until the Shanghai upgrade, which is the next major upgrade following the Merge. When this happens, new ETH will accumulate on the Beacon Chain and remain locked for at least six to 12 months.

In general, ordinary users won’t notice much change, but there are a few points to consider.

The price of ETH is likely to rise

It is expected that the price of ETH will rise immediately after the Merge, in part due to projection as a result of Goerli’s success and a potential system of hedging exposure. But the idea that ETH fees will be burned as a result is simply a myth. Instead, unburned fees and execution-level tips will be sent to stakers. Validators will receive 30% of transaction fees.

Commissions will stay the same, and withdrawals won’t be instantly possible

There has been much talk about how the Merge will change commissions, fees and withdrawals. However, these things are unlikely to occur before the next phase of the network’s transformation. Many of those benefits will come when Ethereum proceeds to the next update step of sharding. It is then that commissions are likely to lower. Similarly, it is at this point that users will be able to withdraw merged ETH (a matter that has received significant speculation).

Becoming a validator may incur bugs or non-synchronization of the blockchain

For users who wish to become validators, there is the possibility of bugs and non-synchronization of the blockchain. The best thing to do is to take care of updating clients and look for specific risks pertinent to the changes in consensus. But most aspects will occur automatically.

What does “being ready” for the Merge look like?

Although the Merge has been designed to have minimal impact on smart contract and decentralized application developers, there are a few small things devs may want to be aware of. Basically, the Merge comes with changes to consensus, which also includes changes related to:

Block structure
Slot/block timing
Opcode changes
Sources of on-chain randomness
Concept of safe head
Finalized blocks.

Therefore, if your app or service relies on reading the block structure, you will need to update it. Any app that reads the state of the blockchain, like a centralized exchange, must update its nodes. The “readiness” of the project for the Merge actually means the changes that will occur during the Merge should not affect the clients of the project in any way. Still, the specifics of each project are unique. If the process goes smoothly, decentralized apps and services should not be affected, although Ethereum has never gone through a comparable update in the past.

The next phase of the process

Users will start to see significant change after upgrades scheduled to take palace after the Merge, most notably the Shanghai hard fork, which will enable the withdrawal of staked funds and increase scalability. And in 2023, the sharding mechanism will be deployed. Sharding will increase Ethereum’s bandwidth even further, in addition to likely reducing network costs.

The Merge holds huge promise for the future, but it is one step in a long process. Users need to understand that to reap the benefits and be prepared.

Svyatoslav Dorofeev is the CEO of TheWatch and is a crypto enthusiast with more than 15 years in product development. He launched and led products in multiple areas, including OTT/IPTV, gaming, travel (OTT), e-commerce and fintech. He was formerly the chief product owner at one of the largest banks in Eastern Europe.

The opinions expressed are the author’s alone and do not necessarily reflect the views of Cointelegraph. This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice.

Monthly Ethereum options data suggests $2K will remain an elusive target

On August 26, $1.27 billion in ETH options expire and data signals that the price is likely to stay pinned under $2,000 until the Merge.

Since failing to close above the $2,000 mark, Ether (ETH) price has faced a steep 16.8% correction, but this was not enough to give bears an edge in the August $1.27 billion monthly options expiry.

*Ether USD price index, 12-hour chart. Source: TradingView*

Currently, there are mixed feelings about the network’s upcoming change to a proof-of-stake (PoS) consensus network and analysts like @DWhitmanBTC believe the potential benefits of PoS do not supersede the absence of a supply cap and multiple changes in the monetary policy over time.

uLtRaSoUnD mOnEy

Is #Ethereum even money?

If so, what’s the supply limit? What’s the monetary policy?

How can anyone trust that it won’t be changed?

— Dick Whitmanaut ∞/21M (@DWhitmanBTC) August 24, 2022

Regardless of the long-term impact, Ether price was positively impacted by the tentative Merge migration date announcement from a July 14 Ethereum developers call . Influencer and technical analyst Crypto Rover said that Ether would “drop so hard on the Merge day,” as a result of traders unwinding their positions.

I think #Ethereum will drop so hard on the Merge day.

The whole anticipation is getting not bought up on the spot market but on the futures market.

Be warned.

— Crypto Rover (@rovercrc) August 23, 2022

One thing is for sure, leveraged Ether buyers were not expecting the steep correction on Aug. 18 and data from Coinglass shows the move liquidated $208 million at derivatives exchanges.

Bears placed their bets below $1,600

The open interest for Ether’s July monthly options expiry is $1.27 billion, but the actual figure will be lower since bears were overly-optimistic after ETH traded below $1,600 between Aug. 20 and 22. Breaking above that resistance surprised bears because only 17% of the put (sell) options for Aug. 26 have been placed above that price level.

*Ether options aggregate open interest for Aug. 26. Source: Coinglass*

The 1.18 call-to-put ratio shows the dominance of the $685 million call (buy) open interest against the $585 million put (sell) options. Nevertheless, as Ether stands near $1,650, most of these bearish bets will become worthless.

If Ether’s price remains above $1,600 at 8:00 am UTC on Aug. 26, only $95 million put (sell) options will be available. This difference happens because a right to sell Ether at $1,600 or lower is worthless if Ether trades above that level on expiry.

Bulls completely dominate the August expiry

Below are the three most likely scenarios based on the current price action. The number of options contracts available on Aug. 26 for call (bull) and put (bear) instruments varies, depending on the expiry price. The imbalance favoring each side constitutes the theoretical profit:

Between $1,500 and $1,600: 108,200 calls vs. 103,900 puts. The net result is balanced between bulls and bears.
Between $1,600 and $1,700: 45,900 calls vs. 90,000 puts. The net result favors the call (bull) instruments by $150 million.
Between $1,700 and $1,800: 192,700 calls vs. 26,000 puts. Bulls’ advantage increases to $290 million.

This crude estimate considers the put options used in bearish bets and the call options exclusively in neutral-to-bullish trades. Even so, this oversimplification disregards more complex investment strategies.

For example, a trader could have sold a put option, effectively gaining positive exposure to Ether above a specific price, but unfortunately, there’s no easy way to estimate this effect.

Bears could avoid a $150 million loss

Ether bulls need to sustain the price above $1,600 on Aug. 26 to secure a $150 million profit. On the other hand, the bears’ best-case scenario requires a push below $1,600 to balance the scales and call it a draw.

Considering the brutal $270 million leverage long (buy) positions liquidated on Aug. 18 and 19, bulls should have less margin to pressure ETH price higher. With that said, bulls are unlikely to have the means to drive ETH above $1,700 ahead of the August monthly options expiry.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

What’s next for the future of Ethereum? Mihailo Bjelic from Polygon explains

The much-anticipated Merge upgrade has been in the making for over two years.

With the transition to a scalable, energy-light proof-of-stake blockchain at play for Ethereum, many have cast doubts on the popular coin’s future, given the magnitude and complexity of the Merge upgrade. But, among prominent stakeholders, one particular project remains heavily bullish on Ethereum’s future, which is none other than layer-two scaling solution Polygon.

At the annual Ethereum Community Conference in Paris, Cointelegraph’s events manager, Maria A., spoke to Polygon’s vice president of growth, Mihailo Bjelic, regarding the topic. Here’s what Bjelic had to say regarding the Merge:

“This is an upgrade on a live network that has millions of users, billions in capital, and tens of thousands of applications. It is never easy, but the Merge has been in the works for over two years. All the testnets have been successful, the code has been audited, etc., so I think we are more than ready for the upgrade.”

Bjelic then explained that it’s more than likely that Ethereum will endure the bear market and recover: “Two reasons. First, it’s the home of innovation and development. It’s where all the developers are, it’s where 90%-plus of activity is happening. Projects focused on the money will disappear, but the true developers will stay.” He continued: “The second reason is that Ethereum is the most secure, decentralized and programmable blockchain in the world, by far. It is perfectly positioned to be the center of this multichain web that we’re trying to build to potentially reach to billions of users.”

Concurrent with this interview, Polygon announced on Wednesday that it launched the Polygon zkEVM, or zero-knowledge Ethereum Virtual Machine, that would potentially scale the blockchain’s transaction output to even greater levels. “It has full EVM compatibility, scalability and security using the power of zero-knowledge proofs. I would say this is a major breakthrough in terms of technology,” said Bjelic. On the adoption side, Polygon has onboarded over 30,000 applications and 140 million user wallets since its inception.

ETH CC: Crypto winter “reinforces” validity of blockchain, says 0x Labs employee

0x Labs developer advocate believes the current crypto winter provides a chance for “rationalization” and “validates” underlying blockchain systems.

Both the ongoing downturn across cryptocurrency markets, and Ethereum’s upcoming merge were under the spotlight on the second day of ETH Community Conference. The wider Ethereum community descended on Paris for the largest annual European Ethereum event, with key roleplayers, companies and individuals taking part.

Cointelegraph spoke to Jessica Lin, developer advocate for decentralized exchange infrastructure firm 0x Labs, to unpack the biggest talking points in the ETH community. Despite the space continuing to endure a significant market slump, Lin believes Ethereum still provides a flexible and secure system on which to build, connect and monetize services and products:

“We’ve been around since 2016, we saw the 2018 crash and realized that these times in the market allow for rationalization and ultimately reinforces the validity of the underlying blockchain system.”

The Ethereum ecosystem is set to undergo its own acid test with the long-awaited move away from its current proof-of-work consensus protocol to a proof-of-stake-based system. The ETH 2.0 is earmarked to take place in the second half of 2022 and Lin believes that the ecosystem is ready to make the shift:

“The successful merge on the Ropsten and Sepolia test nets raises hopes that the mainnet merge in September will go well. We’re excited about it and we are preparing ourselves as well integrators that build on our platform.”

Lin also anticipates that the Merge should be straightforward, with any potential challenges likely to present themselves in the back-end of decentralized applications running on the Ethereum blockchain.

Ethereum 2.0 stakers face a 36.5% larger loss than ETH spot investors — Report

The Ether losses risk becoming steeper due to unfavorable technical and macroeconomic indicators.

Ethereum investors who staked millions of dollars worth of Ether (ETH) tokens to become validators on its soon-to-launch proof-of-stake (PoS) network are now facing heavy paper losses.

Ether spot traders outperform stakers by 36.5%

In detail, investors have locked a little over 13 million ETH into the so-called Ethereum 2.0 smart contract since it went live in December 2020. However, there is no date when these investors can redeem their tokens alongside the 10% yield.

Interestingly, around 62% of Ether tokens were deposited before the price peaked at around $4,930 in November 2021. Meanwhile, the other 38% were deposited after the record high, according to Glassnode’s latest report.

*Ethereum 2.0 total value staked. Source: Glassnode*

As a result, the total value locked inside the Ethereum 2.0 smart contract peaked at $39.7 billion in November 2021, led by 263,918 network validators. But now, the value has dropped to $14.85 billion as of July 7, despite an additional inflow of 5 million ETH in the last eight months.

Ethereum 2.0 stakers deposited ETH to the network’s PoS contract at an average price of $2,390. So, ETH stakers are now holding an average loss of 55% as a result of ETH’s 75% crash since November 2021, Glassnode noted.

Excerpts from its report:

“If we compare this to the Realized Price for the entire ETH supply, 2.0 stakers are currently shouldering 36.5% larger losses compared to the general Ethereum market.”

*ETH 2.0 total value staked realized price versus market price. Source: Glassnode*

Possible bullish and bearish scenarios

Ether’s bear market has also affected Ethereum 2.0 contract inflows.

Notably, the weekly average of 32 ETH deposits into the Ethereum 2.0 contract has fallen to 122 a day compared to 500 to 1,000 per day in 2021. This suggests investors’ reluctance to lock their ETH holdings away amid a bear market.

*Ethereum 2.0 number of new deposits. Source: Glassnode*

From a technical perspective, investors’ fears seem to be legitimate.

Ether risks undergoing a major breakdown in Q3/2022 since it has been painting a classic continuation pattern called the ascending triangle, as illustrated in the chart below. Therefore, ETH’s price could decline to nearly $800, almost 32% lower than July 7’s price.

*ETH/USD daily price chart featuring ascending triangle setup. Source: TradingView*

Conversely, Ethereum’s switch to PoS is almost near after a successful trial on July 6, as Cointelegraph covered. That could have ETH hold above its interim support of around $1,070, as shown in the chart below.

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

Coupled with an “oversold” relative strength index (RSI) reading (below 30), ETH could rebound toward its 200-week exponential moving average (EMA) (the blue wave) near $1,600. That would mark a 35%-plus rally from Jul’s price.

A similar setup appears in the ETH/BTC instrument, which tracks Ether’s strength against Bitcoin (BTC). Ethereum’s successful switch to PoS could have ETH hold above 0.057 BTC, followed by a move upside toward 0.06 BTC, according to Fibonacci retracement graph levels shown below.

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

Meanwhile, macro risks remain the main danger for ETH price; namely, the Federal Reserve’s potential 75 basis point rate hike in July.