ETHEREUM

DIGITAL ASSET REPORT:

ETH Update

Crypto Briefing Research Department

February 28, 2020
Grade-B-plus

Quick Facts

TickerETH
Current Price$223.42
Market Capitalization$24,552,210,650
Buy Up To Price:$710
Funding Information
ICO DatesJul 22, 2014 - Sep 2, 2014
ICO Price$0.31
Public Allocation$18,439,086
Private AllocationN/A
Circulating Supply109,890,530 ETH
Total SupplyUnlimited
Top 10 Addresses13.16%
ATH Price$1,432.88 (Jan 13, 2018)
Sharpe Ratio-0.49
30-Day Average Price$233.9
24H Volume$23,073,682,688
30-Day Average Volume$19,080,210,911

Contents

Fundamental Factors

Market Opportunity 90;
Ecosystem Development 95;
Token Economy 80;
Token Performance 65;
Core Team 80;
Underlying Technology 75;
Roadmap 65;

Combined Score: 8.0

Summary of the Grades

Market Opportunity

Upgraded from 80% to 90%. With a variety of developments during the last year, Ethereum has significantly strengthened its position in the market. No other rival has been able to come close to what Ethereum has achieved.

Ecosystem Development

Upgraded from 90% to 95%. The ecosystem has also been expanding, especially within the DeFi sector.

Token Economy

Maintained 80%. The token economy has not changed. However, this grade is up for revision in the next update as we see how the launch of Phase 0 (Ethereum 2.0) plays out.

Token Performance

Maintained 65%. The price of ETH is still highly correlated with the overall market sentiment.

Core Team

Upgraded from 75% to 80%. With more grants awarded by the Ethereum Foundation and ConsenSys, the project is attracting more highly talented individuals to its protocol.

Underlying Technology

Upgraded from 70% to 75%. From a technological standpoint, Ethereum has seen several successful upgrades and is getting close to the release of Phase 0, Ethereum 2.0, which is an important milestone for the network.

Roadmap

Upgraded from 60% to 65%. The project has a well-defined roadmap for 2020-2021, and it looks like the major milestones will be reached on time, unlike in the past.

Introduction

Ethereum has been one of the most heavily criticized projects over the past two years. The price of ETH has plummeted more than 90% from its all-time high, with retail investors and ICO projects selling their holdings (worth millions in 2017) in order to have at least some fiat to survive. 

The situation was worsened by the project's intrinsic shortcomings around speed and scalability, development progress, and ongoing delays of upgrade releases. 

Unsurprisingly, all of this has produced a lot of FUD and negative media coverage around the project. Some have even been preparing to bury Ethereum along with the entire blockchain industry.

However, as it usually happens in this space, it is rare when prices reflect the real value of the project. Investors tend to overvalue projects’ achievements during bull cycles and undervalue them when the market is bearish. 

This is exactly what is currently happening with Ethereum. We are not yet in a bull cycle, and investors are still overly cautious.

However, Ethereum is fundamentally stronger than it's ever been. Despite all of the criticism, it continues to be the number one project by development activity, with a massive developer community. No one from the list of 'Ethereum killers' has come close to what Ethereum has achieved since its launch. 

Its ecosystem is continually growing. Despite its scalability obstacles, the development of the DeFi space has been tremendous over the past two years, with a number of other successful projects building solutions on Ethereum. 

Also, given the recent positive news around Ethereum 2.0, the project seems to be moving towards finally solving its throughput issues, which should help it further strengthen its market position. 

With this said, Ethereum far outpaces its closest rivals and is well-positioned to excel in the coming years. 

Ethereum 2.0 Launch Is Getting Closer

There is a lot of negative news around Ethereum. The discussion is dominated by concerns due to the protocol’s slow development, undefined deadlines, and delays when it comes to releasing new protocol upgrades.

This has been an ongoing issue. However, Ethereum’s founder, Vitalik Buterin, does not express the same concerns. Moreover, according to Buterin, “Negative dispositions do not slow production by one day."

In fact, it currently looks like Etherum is finally getting close to the release of its major system-wide upgrade, Ethereum 2.0.

According to Danny Ryan from the Ethereum Foundation, “Phase 0 will certainly launch in 2020.  Audits are out and testnets are getting stronger every week.” Phase 0 and Phase 1 are 99% and 90% complete. Phase 0 is expected somewhere around Q2 2020. 

The launch of Phase 0 will be a major milestone for the Ethereum community. It will feature the launch of an entirely new chain, Beacon Chain, which will operate on Proof of Stake (PoS) consensus and manage all of the shards.

Once Phase 0 is deployed, there will be two Ethereum chains, the old Proof of Work network, and the new PoS blockchain. Users will have the ability to migrate their ETH to the new chain and start participating in the validation of the network.

To become a validator, you'll need to stake 32 ETH. This could place downward pressure on the circulating supply of Ethereum on the market since users will not have a chance to migrate ETH back (from PoS to PoW). Though, on exchange staking may dampen this effect.

Also, According to Buterin, his team wants the new PoS system to start slowly in order to prove its capabilities and security over time. Initially, the PoS network will start with no applications and will have a small number of validators.

Following the launch of Phase 0, the network will prepare for Phase 1. This phase will feature 64 shard chains, allowing much greater scalability for the network as well as parallel transaction throughput.

Phase 2 will introduce additional functionality to the network with eWASM, where each shard will manage a virtual machine. Similar developer tools (such as Truffle, Solc, and Ganache), execution environments should also be expected at this stage. 

Also, it is important to notice that during Phases 0, 1, and 2, the main PoW chain will remain active while developers test the resilience of the new network.

It is likely that only during Phase 3 the network will merge to a single blockchain. How this will happen, however, is still being decided. 

Nevertheless, Phases 0, 1, and 2 are expected in 2020-2021, which shows that the project is on track to complete what has been planned. 

Even though this might be “too slow” for some people, most of the other large networks have been far behind Ethereum in terms of adoption, realistically speaking. Moreover, they either face similar scalability issues or decentralization concerns.

Low scalability may not be an issue at this stage of the industry life cycle, either, even if in the long run it is a necessity. This point is well supported by a variety of DeFi and other dApps already working on Ethereum. 

Moreover, there are already a number of other second-layer solutions that are tested and developed, such as Plasma and “Optimistic Rollups,” which can scale the current network. 

All of these factors show that Ethereum is technologically well-positioned to suit the current needs of the market. With further progress on the Ethereum 2.0 release, the project has the potential to significantly increase its domination on the market.

Growth of DeFi on Ethereum

Despite the scalability concerns mentioned above, the adoption of the Ethereum blockchain has been on the rise. In fact, one such market where Ethereum excels is DeFi.

Decentralized Finance (DeFi) has been a growing trend over the past several years. The capital locked up in DeFi smart contracts has grown from zero to nearly $1B in just over two years. The market is growing at an exponential rate and Ethereum is the number one beneficiary of this rising economy.

Given that the cryptocurrency market is getting closer to the next bull cycle, the DeFi space may significantly grow in popularity. Over the last two months, the number of funds staked on DeFi smart contracts has nearly doubled, and we are just in the early stages of a new cyclical bull market. A lot more should be expected as bulls are expected to dominate the market.

The more projects that are created on Ethereum, the more developers and users are attracted to the protocol. 

DeFi on Ethereum started just over two years ago with just one dApp, MakerDAO⁠—a stablecoin system. However, there are currently a variety of dApps which give access to a full range of features and financial services. Users can issue stable coins, borrow and lend, and trade cryptocurrencies without having to deal with centralized third parties.

As the space evolves, there will be even more dApps working for the benefit of users. This will have a direct effect on the utility and demand for the ETH. Around 2.5% of the ETH supply is staked on DeFi smart contracts, and this number is expected to get much bigger.

This will likely give a necessary boost to the price of the coin and significantly improve the sentiment around the Ethereum protocol going forward.

Ecosystem Developments

DeFi is definitely a driving force of Ethereum adoption. However, there are many other projects that are building its solution on Ethereum and should help the network achieve its adoption goals.

The list of these projects is just too long to start naming them here. However, they cover pretty much every sector of this industry, from Oracles to DAOs, to Gaming. In fact, the Ethereum network attracts the vast majority of developers that are looking to build something using blockchain and smart contracts. 

Ethereum has a large user base, which is why it is the number one choice for developers. Only the Ethereum browser wallet, Metamask, has recently surpassed one million users on its Google Chrome extension, which is a large number for a cryptocurrency project. 

Ethereum’s ecosystem has also been supported by the Ethereum Foundation, which, according to Vitalik Buterin, had sold around 70,000 ETH at the top (at ~$1,400). This helped the project secure around $100M, which will be spent on ecosystem development.

During 2019, the foundation has been actively awarding grants to different ecosystem projects. A recent grant ($650K) has been awarded to the Nimbus team, which will continue its work on a client implementation for Ethereum 2.0. In fact, grants will help bring more developers to work on the upcoming upgrade.

The other major ecosystem player, ConsenSys, has also been actively granting projects that are building on Ethereum. Since 2019, the organization has funded 25 projects, of which 15 have been funded to the tune of $330,000. 

On the enterprise side, the project has also been moving forward.

Recently, the Ethereum Enterprise Alliance, Unibright, and ChainLink announced the new mainnet working group that will work on Ethereum mainnet integration for enterprises. This may help bring enterprises from private chains to the public Ethereum network. 

Overall, Ethereum’s ecosystem has shown good dynamics and has seen significant progress over the last year. The current infrastructure and the foundation that is building the protocol will significantly help when more users come to the protocol during the next bull cycle.

Conclusion

Since our initiation report on Ethereum, the project has shown significant progress. On the development side, we are getting close to the release of Phase 0 of Ethereum 2.0. On the ecosystem side, there have been a number of great projects building on Ethereum. The DeFi space has shown tremendous progress over the last year, attracting users and developers to the platform.

All of these factors show that Ethererum is in a good position to not only maintain its spot as the number one platform for smart contracts, but grow its domination in the future. Therefore, it is getting an upgrade from B to B+

The author(s) of this report is/are invested in the following coins: BTC, ETH.

How to buy ETH

ETH can be purchased from several cryptocurrency exchanges. The full list of exchanges can be seen ​here​.

Step 1. Head over to your preferred exchange.

If you want to purchase ETH, you may use Coinbase. It is a popular exchange with a simple user interface that allows one to purchase cryptocurrency using a debit card or a bank account.

Step 2. Create an account on the exchange of your choice if you don’t already have one.

On Coinbase, verify your ID and set up your debit card or bank account. Note that a bank account can be used to make large purchases of up to $25,000 with the lowest fees, while a debit card is recommended for smaller investments.

Step 3. Choose ETH out of the list of supported crypto assets.

Head over to the Coinbase home page and choose ETH out of the list of tradable assets by pressing ‘Trade.'

Step 4. Purchase ETH with USD or a different crypto asset that you own.

If you want to buy ETH using your debit card or bank account, specify the amount in USD and press ‘Preview purchase,' which will take you to a summary page where you can press ‘Buy now.'

Alternatively, you may want to convert a different asset that you own to ETH, for example BTC. Navigate to ‘Convert’ and specify the amount. Press ‘Preview conversion,’ which will take you to the summary page where you can press ‘Convert now.'

Step 5. Store your ETH on one of the supported wallets for increased security.

To store ETH, you can either use the default Coinbase wallet or use Trezor or Ledger for improved security.  To migrate your ETH to an external wallet, from the home page navigate to ‘Accounts’. Then press ‘Send’ and specify the wallet address and amount. Press ‘Continue’ and confirm the transaction details to complete the transfer.