Highlights
- Ethereum’s upgrade to 2.0 is seen as the next-generation blockchain that owns greater speed and scalability than the current iteration.
- Eth2.0 has the tendency to drive individuals to participate in the market through mining, increasing the number of Ethereum coin holders.
- Ethereum 2.0 upgrade can change the network significantly. But it is dependent upon the reactions of market participants.
Ethereum 2.0 is the most awaited iteration of the blockchain amongst the Ethereum community members. Ethereum’s upgrade to 2.0 is seen as the next-generation blockchain that owns greater speed and scalability than the current iteration. With the above reasons, there is no doubt why there exists a lot of exaggeration for its launch.
Ethereum 2.0
Ethereum 2.0 is a project to move the ETH’s ecosystem towards Proof-of-Stake (PoS). The current network operates only through Proof-of-Work (PoW) algorithm wherein miners compete to add blocks for the addition of blocks to the ETH blockchain. Therefore, the main objective of Ethereum 2.0 lies in the improvement of the scaling and security of ETH features.
PoS removes the mining competition through the implementation of an algorithm for the retrieval of block awards. Hence, the more Ethereum one owns and the more the transactions one validates, the greater is the chance to receive block rewards.
Affects Ethereum 2.0 will have on the ETH price
- Positive impact on ETH price
The positive impact Ethereum 2.0 will have on the price value of ETH is noteworthy.
- Speedy Transactions: Transactions would speed up and blockchain networks would be much more efficient. An increased number of transactions per second can drive traders to hold the coin. It can encourage them to transfer instantly around exchanges with a low fee charged.
- Increased ETH coin holders: It has the tendency to drive individuals to participate in the market through mining, increasing the number of Ethereum coin holders.
- A likeable chance for price to go up: PoS has the capability to encourage investors to receive block awards through purchase and coin-holding. Therefore, it is predicted that the price will go up if the supply stabilizes.
- More valuable ETH blockchain network: PoS payment validations would also be faster. All of these will resultantly increase the value of Ethereum’s blockchain network and the coin itself in case the market’s reaction is positive to the changes.
Negative impact on ETH price
However, Ethereum 2.0 as a next-gen move also poses issues that are true in their potential to occur.
- It will trigger large investors to hold coins only to acquire even more coins. Hence, resulting in a large liquidity drop.
- The support of market participants to the miners will have a negative impact on Ethereum and its price. Ethereum 2.0 is hence probable to take a longer time for its finalization.
- Ethereum 2.0 upgrade can change the network significantly. But it is dependent upon the reactions of market participants.
Final Words
Faster transactions, fair market power share, and increased coding speed can become reasons for the coin growth. However, the question remains if the ETH can hold the value for an elongated period of time. Although Ethereum 2.0’s view as next-gen looks sparkling, the doubt of how sparkling it can remain unclarified. Nevertheless, as Ethereum 2.0’s launch is nearing, investors seek to place themselves to benefit fully from this upgrade.