Author: Moc, the Chief Analyst of BlockArk.
What is the Meaning of the Metanarrative?
Abraham Maslow proposed Maslow’s hierarchy of needs, predicated on fulfilling human needs in priority. Needs at the bottom of the pyramid are basic physical requirements. Once these lower-level needs have been achieved, people can move on to the need for safety/security. Further up, the need for love/belongings, personal esteem and self-actuliaztion take priority.
All physiological needs, safety needs, social needs, and respect needs are all prepared for the highest self-actuliaztion goal.
But it is very difficult to achieve self-realization. The vast majority of people in this world are destined to be ordinary people, and there is no possibility of self-realization. Therefore, a metanarrative, a story encompassing and explaining other ‘little stories’ within totalizing schemes, is necessary. It can satisfy people’s needs for self-realization.
The Metanarrative of the Capital Market.
Besides, the metanarrative of the capital market is the same. There is nothing more comforting than an inspiring metanarrative in a struggling and cumbersome investment career. Just need to be immersed in the story with the crowd to get the satisfaction of wealth and investment.
In the traditional capital market, Jia Yueting’s Faraday Future and Elon Musk’ Tesla are two typical cases of the metanarrative of China A-Shares and U.S. stocks separately. They both gave investors and market a very big stimulus in a period of time. The difference is that one has no realizing ability and the other has. Elon Musk, a man who changed the electric car industry, privately formed a company, launched a rocket and started a Mars immigration plan. In this way, compared with XPeng(Xiaopeng Motors) and NIO (Weilai), Tesla’story is suddenly more charming, and the stock price is a lot sexier.
Similarly, those well-known blockchain projects still follow this rule.
BTC — — Digital Gold
LTC — — Digital Silver
FIL — — A new generation of interplanetary storage network
DOT/ATOM — — Web3.0/Cross-chain
EOS — — Blockchain 3.0
EOS is a strong competitor of ETH. Vitalik appointed that EOS is the “real ETH 2.0”, although it seems a bit ironic now, there were a lot of supporters back then.
And what is the metanarrative of ETH 2.0?
Review of DeFi Speculation
The listing of COMP in June started the mighty speculative wave of DeFi, which lasted for nearly three months. It coincides with the retreat of the DeFi fanatical speculation. It can be said that the DeFi speculative wave and the previous 2018 Dapp speculative wave (mainly ETH/EOS/TRON) proved there are only two categories, which are ETH and ETH competitors. A large amount of data is constantly corroborating this fact.
In comparison with the transaction volume, all other public chains’ are almost compressed into a horizon compared with ETH.
Even in this round of DeFi, TRON, the best-performing public chain other than ETH, still face a major decline.
In contrast to ETH, the core applications on it have precipitated the user base. From the data point of view, ETH’s DeFi lock-up amount has not been greatly reduced as the speculative tide subsided.
Regardless of whether it is the head application for DEX like Uniswap or the head application for lending like Compound, locked position is still rising steadily.
The third-to-last red bar is an abnormal transaction caused by the Harvest hack.
From the perspective of transaction volume, even though there has been a significant decline, Uniswap still far exceeds its’ volume before August 2020 and is accompanied by a continuous increase in the amount of locked positions.
Uniswap has the same resilience as BTC, and the “silt” accumulated after ebb makes them have a better growth soil.
For the cryptocurrency market, DeFi speculation has ebbed, but DeFi has not ebbed, and there is no ebb for ETH. History has proven that ETH has won. Blockchains such as Thunder and Algorand, which purely have the advantage of being fast, are no longer sexy.
What is the Metanarrative of ETH 2.0?
For ETH, now the only competitor is itself, how to better achieve the needs of the encrypted world is the top priority. An ironic fact of the crypto world: The core and right centre of the crypto world is currently a centralized exchange that is completely centralized.
Then all this is quietly changing. Dapp and DeFi gave the cryptocurrency investors the best rehearsal of the blockchain life, opening up our horizons. It turns out that using a wallet can perform various operations such as transactions and lending while retaining control of their own assets.
ETH is already at the door of the encryption centre, ready to break in at any time.
And before its full success is two shackles: inability to cross-chain and low TPS (Transaction per second).
Cross-chain currently does not have a systematic solution like DOT, but cross-chain bridge solutions like REN are available. After all, in the absence of revolutionary progress in other public chains, strong user inertia makes ETH still the centre of the Matthew effect.
Wrapped Bitcoin will be accepted as a trusted asset. WBTC can already occupy the top 15 position in market capitalization. Wrapped in other currencies is not difficult to achieve technically. In the third quarter, we also considered currencies on other public chains like TPT and FNX migrate to ETH in a centralized way.
As for the speed limit. This limitation of ETH has allowed EOS and TRX as higher-performance public chains (more centralized than ETH) to gain greater momentum when the Dapp for trading and mining emerged. At the same time, products that rely on high-speed clearing such as derivatives have not been popular on ETH.
Order book-style DEXs such as EtherDelta and IDEX have always been relatively niche in the exchange. The rise of Uniswap this round has benefited from the alternative breakthrough of the AMM approach.
Uniswap’s trading volume can currently reach 5.9% of Binance’s. However, the general centralized exchanges have false data. If we compare Coinbase, whose data is relatively real, the proportion can reach 35%. In the ranking of Coingecko, excluding the exchanges that we know of which have obvious false volume, Uniswap ranks 11th in transaction volume.
In other words, after Uniswap, there are no second-tier exchanges. And after ETH 2.0, it may be that there is no first-tier centralized exchange after XXswap. With the current performance of ETH, Uniswap can be used as a challenger to the first-tier exchange to log in to the historical arena, let alone the expectations brought by the high performance of ETH 2.0. It can be said that when ETH 2.0 matures, the world’s largest cryptocurrency exchange can only be DEX.
There have been frequent incidents on centralized exchanges —— Okex’s founder Xu Mingxing was investigated by the police for allegedly assisting in money laundering, which paralyzed the withdrawal of Okex assets. Although DEX and CEX are equal in front of hackers, CEX will never give real control over the assets that DEX can give users.
The metanarrative of ETH 2.0 is that ETH stands for blockchain. It will create a huge siphon in the crypto world beyond ETH. All public chains that cannot keep up with the rhythm will be siphoned by ETH, and all exchange tokens that cannot keep up with the rhythm will be siphoned by ETH. High-performance public chains will accelerate more applications development, and these applications will consolidate the foundation of ETH. It can be said that ETH 2.0 is the one in addition to BTC.
The Three Stages of ETH 2.0 and Low Inflation
Ethereum 2.0, also known as Serenity, is the next major upgrade of the Ethereum blockchain.
Ethereum 2.0 is planned to be launched in at least three phases: Phase 0, 1, and 2. Phase 0 is planned to start in 2020, and Phase 1 and Phase 2 will be released in the next few years.
Phase 0: Start the Beacon Chain
Phase 0 focuses on getting the validators on the Beacon chain up and running. Users can deposit 32 BETH (BeaconETH) on the chain to become a validator, but at this stage, the validator only manages the Beacon chain, and there is no shard chain at this time.
The Beacon chain will maintain a simple iterative design as much as possible in the early stage. Accounts, asset transfers and smart contracts are not supported at this stage. BETH can only be used by verifiers and cannot be transferred on the chain, nor can it be transferred to exchanges.
The Beacon chain is a brand new PoS blockchain. It is the core component of Ethereum 2.0. ETH 2.0 also includes the shard chain and the virtual machine layer.
The original ETH 1.0 will become one of the shards of ETH 2.0. And because there are two chains, there will be two tokens, ETH and BETH during operation.
Phase 1: Start the Shard Chain
Phase 1 will add the shard chain component to realize the Beacon chain + shard chain. However, this stage is just a trial run of the sharding structure, not real expansion with sharding. The Beacon chain treats the sharding chain block as a simple set of bits with no structure or meaning. The shard chain still has no accounts, assets and smart contracts at this time.
The Beacon chain will support 1024 shard chains, and each chain has a group of 128 verifiers to form a committee to verify. The Beacon chain randomly selects a shard verifier for each shard in each cycle, and the shard verifier proves the content and status of the shard through “cross-linking”.
It needs to be pointed out that in Phase 0 and Phase 1, there is no data circulation between Ethereum 1.0 and Ethereum 2.0, and Ethereum is still running on the PoW chain.
Phase 2: Start the Virtual Machine Layer
Phase 2 will join the virtual machine layer, which is the last important component of Ethereum 2.0. The Ethereum that implements the Beacon chain + sharding chain + virtual machine layer is a complete public chain system that we are familiar with. The availability of Ethereum 2.0 will be officially realized at this stage.
At this time, smart contracts are introduced into the system, and assets can be transferred freely on the chain; the shard chain has changed from a simple data marker to a fully functional blockchain, and the cross-linking operation supports cross-shard communication; some of the most commonly used ones Development tools may also be ported to Ethereum 2.0 to support EVM2. EVM2 is Ethereum’s new virtual machine eWASM, based on Web Assembly, and supports multiple programming languages to implement smart contracts.
Not to mention phase 2, even phase 1 will take 1–2 years, which means that the current launch of ETH 2.0 is still a long way from the real application, which means that even if ETH 2.0 has a climax before December, it is just the climax of speculation. Don’t expect too much from ETH 2.0 in the short term. At the same time, this also means that before the real 2.0 comes, the contradiction between ETH’s current low operating speed and more and more applications makes layer2 a direction worthy of attention.
Let’s make a summary. The core upgrade of ETH 2.0 is POS+ sharding, both of which exist to improve the scalability and throughput of ETH.
ETH 2.0 Startup Progress
Ethereum 2.0 is scheduled to be officially released on December 1, and the creation time is scheduled for January 3, 2021, which is the 12th anniversary of the birth of the Bitcoin network. A pledge of 524,288 ETH is required to start.
ETH 2.0 startup progress can be viewed in real-time on this website
https://launchpad.ethereum.org/
The current progress is about 9.6%. The progress has been advancing, but there is a high probability that the startup conditions will not be met on December 1.
When the pledge start condition of 524,288 ETH is reached, the yield is 21.6%. At this time, the mortgage can be continued. When it reaches 10M ETH, the yield is 4.9%, which means that the final inflation rate is about 0.43%. This is not high, and the mortgage rate at this time is almost 8.8%. The inflation rate of ETH based on PoW is approximately 11.20% per year.
It is well known in the crypto community that Bitcoin’s current inflation rate is about 1.8%, which is better than the inflation rate of a basket of global fiat currencies, which is about 2.99%. That is, when ETH 2.0 is launched, the inflation rate of ETH will be better than that of BTC.
And with the introduction of ETH 2.0 proposal EIP 1559, a large amount of transaction fees will be burned instead of being paid directly to miners. This means that if more transaction fees are burned than newly issued ETH, the net inflation rate may even be negative.
ETH miners captured all fees associated with transactions on the Ethereum network. In the past year, miners earned approximately 259,823 ETH (59.7 million USD) in fees. However, the huge excess income of miners does not contribute much to the ETH network itself.
It can be seen that the trait of scarcity will become more prominent in ETH 2.0. As we all know, 21 million bitcoins is fixed, and they have always been talked about and plagiarized as quotations by the various project. Deflationary ETH is obviously larger in the imagination of a single value.
ETH 2.0 Participation Guide
The threshold for building ETH nodes is not high. Hold 32 ETH and just follow the official guidelines and hardware standards to build node. There are three ways to participate
Build it yourself
It is not recommended for retail investors to participate, you have to ensure that your node is always online, because there will be a margin penalty if you continue to be offline.
If you want to build it yourself, you can refer to the following article.
https://www.chainnews.com/articles/602578542483.htm
Trading platform
In the past 2 years, a centralized Stake solution like Binance has become very mature and faces full competition. Ordinary users do not need to adopt self-built solutions at all.
However, the innovation momentum of mainstream trading platforms is not as fast as that of small exchanges, so the launch speed may be slower. Small exchanges will launch products faster, but retail investors are not recommended to participate. Because second-tier exchanges face a more difficult competitive environment after DEX becomes more mature.
On-chain service provider
For example, Ankr, Blox, Rocket Protocol, etc. provide non-custodial “one-click staking” methods, and all provide “single pool” services to satisfy users who do not have enough 32 ETH. For example, Ankr and Rocket Protocol will also provide bond ETH to ensure that the pledged ETH can still be circulated on the market, which also eliminates the fear of most players about the loss of liquidity of the pledge.
It is worth mentioning that. At present, the process of Ethereum 1.0 ETH entering the 2.0 deposit contract is one-way, and it is impossible to go back at this stage. According to the official documentation, after the first stage of Ethereum 2.0, verification talents may transfer funds. After the second stage, verification talents can extract these assets to a specific shard. The entire development process may require 2 years.
And this may become a hype stage. During this hype period, part of ETH becomes BETH and is locked, but more and more ETH applications still use ETH, which will make the real circulation of ETH less and less.
There is not much time left for other public chains. ETH 2.0 is on the way.
Conclusion
As we mentioned at the beginning, metanarrative can satisfy people’s needs for self-realization. We know that this is not everyone’s pursuit, so you can also directly look at the conclusions about ETH 2.0:
- The metanarrative of ETH 2.0 is that ETH is the blockchain.
- ETH 2.0 is a one-way channel, which will reduce short-term circulation and provide space for hype.
- The profit-loss ratio of investing in second-tier exchanges is very low.
- Investment in public chains without unique trading points has a very low profit-loss ratio.
- ETH 2.0 is still in the hype period. The realization of real ETH 2.0 requires a longer period. Prior to this, Layer is a direction worth paying attention to. Projects in this area include NEAR/Skale.
- The service providers on the chain include Ankr, Blox, and RPL (issued token), and there is a very obvious linkage when ETH rises on November 5th. But please note that their real Stake service has not been launched in the short term.
About BlockArk
BlockArk is an investment banking and marketing advisory firm focused on Blockchain. Team has the background from Tencent, Accenture and PwC.
Website: https://blockark.io
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