The First Mainnet Shadow Fork Goes Live, What Is Next for Ethereum?
2022-04-12 16:30:28
Will Ethereum Price Go Up After Shadow Fork?
It is not new that Ethereum is going to convert from Proof-of-Work (POW) consensus mechanism to Proof-of-Stake (POS), and the Ether development team is always updated with the progress in this regard. Yesterday (April 11th), it is reported that Ethereum's first mainnet shadow fork went live.
According to Parithosh Jayanthi, an Ethereum Foundation developer, the shadow fork is a way to "stress test our assumptions around syncing and state growth" and also provide "a way to check if our assumptions work on existing testnets and/or mainnet."
In short, the test was a dress rehearsal and also marked the latest step toward what’s called the “Merge”, which refers to the software upgrade that will change the way transactions on the Ethereum network are ordered. Currently, Ether miners use giant server farms to order transactions. After the Merge, the miners will be out of the job while transactions will be done by stakers.
The change is so important as it is projected to cut Ethereum’s energy consumption by up to 99%. As we all know, both Bitcoin and Ethereum are facing criticisms on energy issues as they rely on POW, under which miners must complete complex puzzles to validate transactions. This process requires a huge amount of computer power which may result in environmental impact.
What is the market reaction to shadow fork?
Being the world's second-largest cryptocurrency by market cap, any shift on the Ethereum network will be watched closely. At the time of writing, it trails only Bitcoin in market value at around $362 billion according to Gate.io while its volume is under a million less than Bitcoin. More importantly, the Ethereum network also supports popular decentralized finance (DeFi) applications and non-fungible tokens (NFTs). DeFi apps with more than $108 billion in value locked in Ethereum are also dependent on the update.
However, while the various tests are necessary in order to implement a successful upgrade, the market might be impatient as the merge has been delayed multiple times in the past. The best evidence of this is reflected in ETH price. Data from Gate.io showed that Ether fell about 8% on Monday from $3,214 to $2,950 amid a broad decline in crypto prices.
In fact, the bears took control of the crypto market from last week as ETH price was down 12% since reaching its weekly high of above $3500. Technical analysis indicates that on the daily timeframe, ETH is very close to the key support level at $2800 – $3000, which has shown an excellent area for a possible trend reversal: when the buyers are more greedy and aggressive than the sellers, an uptrend can be formed.
However, we have to wait and see if greedy buyers will re-enter the market at the key support mentioned above. If ETH price goes below this key level this week, we can expect the downtrend to continue. Until then, it is better as we said in the previous articles, to avoid emotional decisions and act more cautiously if you consider now as a good time to buy Ethereum.
It is not new that Ethereum is going to convert from Proof-of-Work (POW) consensus mechanism to Proof-of-Stake (POS), and the Ether development team is always updated with the progress in this regard. Yesterday (April 11th), it is reported that Ethereum's first mainnet shadow fork went live.
According to Parithosh Jayanthi, an Ethereum Foundation developer, the shadow fork is a way to "stress test our assumptions around syncing and state growth" and also provide "a way to check if our assumptions work on existing testnets and/or mainnet."
In short, the test was a dress rehearsal and also marked the latest step toward what’s called the “Merge”, which refers to the software upgrade that will change the way transactions on the Ethereum network are ordered. Currently, Ether miners use giant server farms to order transactions. After the Merge, the miners will be out of the job while transactions will be done by stakers.
The change is so important as it is projected to cut Ethereum’s energy consumption by up to 99%. As we all know, both Bitcoin and Ethereum are facing criticisms on energy issues as they rely on POW, under which miners must complete complex puzzles to validate transactions. This process requires a huge amount of computer power which may result in environmental impact.
What is the market reaction to shadow fork?
Being the world's second-largest cryptocurrency by market cap, any shift on the Ethereum network will be watched closely. At the time of writing, it trails only Bitcoin in market value at around $362 billion according to Gate.io while its volume is under a million less than Bitcoin. More importantly, the Ethereum network also supports popular decentralized finance (DeFi) applications and non-fungible tokens (NFTs). DeFi apps with more than $108 billion in value locked in Ethereum are also dependent on the update.
However, while the various tests are necessary in order to implement a successful upgrade, the market might be impatient as the merge has been delayed multiple times in the past. The best evidence of this is reflected in ETH price. Data from Gate.io showed that Ether fell about 8% on Monday from $3,214 to $2,950 amid a broad decline in crypto prices.
In fact, the bears took control of the crypto market from last week as ETH price was down 12% since reaching its weekly high of above $3500. Technical analysis indicates that on the daily timeframe, ETH is very close to the key support level at $2800 – $3000, which has shown an excellent area for a possible trend reversal: when the buyers are more greedy and aggressive than the sellers, an uptrend can be formed.
However, we have to wait and see if greedy buyers will re-enter the market at the key support mentioned above. If ETH price goes below this key level this week, we can expect the downtrend to continue. Until then, it is better as we said in the previous articles, to avoid emotional decisions and act more cautiously if you consider now as a good time to buy Ethereum.
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