According to the QKL123 market, in the early morning of August 2nd, ETH rose rapidly, approaching $400 at one point, setting a record high since August 2018. At the same time, it also drove the rise of other mainstream currencies. Bitcoin broke through 11800. The US dollar hit a new high since August 2019. As of press time, ETH reported $387.88, a 24-hour increase of 12.04%; BTC reported $11819.4, a 24-hour increase of 4.36%; other mainstream cryptocurrencies, XRP increased by 12.45%, BCH increased by 6.45%
Since its launch on July 30, 2015, Ethereum has gone through the first 5 years, and has now become the second largest cryptocurrency by market value, second only to Bitcoin.
Ethereum is the first, and until recently, the only general-purpose blockchain, with a Turing-complete virtual machine and native programming language, capable of using code of any algorithmic complexity.
Five years after its launch, approximately 200,000 active developers are building projects on Ethereum, bringing exciting developments such as Decentralized Finance (DeFi) and Ethereum 2.0. But Ethereum also faces challenges, and some new entrants seem to threaten its rule. So, how will Ethereum develop in the next five years?
Upgrading to Ethereum 2.0
Trustology CEO Alex Batlin said that with the upcoming Ethereum 2.0, his company is experiencing the development process firsthand as a participant in the Codefi pilot project operated by Consensys. He says:
“Codefi allows us to work with leading ETH developers to quickly staking for our customers.”
Ethereum 2.0 is planned to go live in 2020, but it will be carried out in phases. Phase 0 will be launched at the end of summer/early autumn this year. This is the core upgrade of the entire Ethereum ecosystem from a Proof of Work (PoW) consensus model to a Proof of Stake (PoS) model.
Batlin said:
“The upgrade will provide lower latency and higher throughput, which will be the key.”
Today, any ETH block can hold 500 transactions, and a block is created every 20 seconds (with a delay). Upgrading to the PoS model means that you no longer need calculations to verify transactions, so it is faster.
“You can think of it this way, the time spent on computing is a mechanism to combat fraud. Using the ETH 2.0 PoS model, you are now looking for a blockchain that will utilize the sharded data structure, which will increase at any given time The number of transactions processed at a point. The pressure is greater, so it will be faster and wider.”
Kosala Hemachandra, CEO and founder of MEW (MyEtherWallet), said that the constant change of the release schedule of Ethereum 2.0 has become a “some kind of meme”.
Hemachandra said:
“But you must remember: on the blockchain, what we are facing is immutability. Solving the problem correctly is more important than solving it quickly. This fall should mark the beginning of Ethereum’s switch to PoS. Before any version, Ethereum has always regarded multi-chain support as a key factor. What ETH 1 can achieve, ETH 2 can also be achieved. Now there are about seven ETH 2.0 beacon chain clients. Using this method, it is easy to capture and Fix unforeseen errors and loopholes.”
Outstanding projects being created on the Ethereum network
There are many project teams that are building Ethereum 2.0 clients, and all teams are solving current problems in unique ways.
Jonathan Zerah, Head of Marketing at Status Network, emphasized the Nimbus client, “The ultimate goal is to create a client that can run well on embedded systems and personal mobile devices, including older smartphones with resource-constrained hardware.”
“The DeFi tool has discovered a novel way to subvert the traditional financial system.” – Jonathan Zerah
Zerah said that in the past year, the Ethereum field has made considerable progress, and more and more developers have entered the ecosystem, especially in the rapidly growing DeFi field. He said: “DeFi tools such as MakerDAO, Uniswap, Synthetix and Keycard have found novel ways to disrupt the traditional financial system. In addition to the direct DeFi industry, there are many interesting projects, such as Tornado for private transactions. cash and LeapDAO, which is committed to the second layer of solutions to improve scalability.”
Ethereum’s DeFi boom
In recent months, DeFi has attracted widespread attention, and more than $4 billion has been locked in DeFi projects. However, the industry is still in its infancy, which means that the process of decentralization is still in progress.
Zerah told Decrypt:
“With the distribution of various governance tokens and the search for market value, decentralization will be improved. DeFi products are gradually being used by ordinary consumers. For example, a year ago, the process of accessing DeFi dapps was for new users It may be very troublesome. Now, users may only need to download a DeFi application to start using many DeFi tools, such as Uniswap. Uniswap is one of many applications that provides a user-friendly portal to access DeFi tools, including Argent, MathWallet and Eidoo.”
Zerah added that as the user experience becomes simpler, the attraction of higher interest rates such as loans or savings accounts may attract more and more retail consumers into the DeFi space.
Batlin believes that in the next five years, decentralized finance will become the most trusted global liquidity pool on the planet. He said: “This is clearly on the trajectory of future development. As DeFi goes global and becomes reliable, more liquidity will flow there and attract more liquidity. All of this will go through decentralization. Because it’s safer.”
“As DeFi goes global and becomes reliable, more liquidity will flow there and attract more liquidity.” – Alex Batlin
Batlin said that by creating custodial services, both institutional investors and retail customers will be able to access DeFi and have all the security controls of traditional finance. “This in turn will promote legitimacy and thus generate much-needed confidence in the market.”
Hemachandra said that thanks to the current enthusiasm for liquid mining, the development of DeFi is currently explosive. “Although this boom is attracting widespread attention because it is easily adopted, in the next few years, DeFi will shift from a trendy and high-risk approach to maximizing the benefits of cryptocurrencies. It has gradually become a daily necessity and reality for people’s personal financial management-lower risk, easier to use, more reliable, and more popular.”
Ethereum’s future challenges
The two main problems that the Ethereum 2.0 upgrade aims to solve are Ethereum expansion and gas fees.
According to Hemachandra, multiple protocols and solutions are currently being considered and integrated, but if Ethereum is to truly become a useful tool for hundreds (or even thousands) of active dapps, this is still an important challenge.
He added:
“Another major change is the transition to PoS. The number of wallets holding at least 32 ETH (the amount required to be a validator of ETH2.0) is increasing, but how many participants can deposit and maintain the network-and to users and It remains to be seen whether the transition of dapps to PoS will go smoothly.”