Surging from $1,100 at the beginning of 2021, the ETH price had more than quadrupled over the last year and peaked at $4,891 (as of November 8). This growth rate seems minimal when compared with crypto that achieved hundredfold price increases. However, we must consider the massive scale ($194 billion) of the Ethereum ecosystem. In 2021, the market cap of Ethereum soared by $175 billion. During last year, Ethereum saw enormous growth. Some crypto professionals say that based on its performance in 2021, it is likely that Ethereum may overtake Bitcoin in market cap by 2022 or 2023.
Considering the big moves made by Ethereum in 2021, it may indeed catch up with Bitcoin at a certain stage in the future.
Key Step 1: London Upgrade
On August 5, 2021, Ethereum launched the London Upgrade at the block height of 12,965,000. As of January 4, 2022, 150 days after the London upgrade, the total Ethers burned has exceeded 1.34 million, while the total amount of ETH staked on the chain has reached 8.86 million. The London Upgrade has had a direct impact on the revenue of Ethereum miners. Although the official implementation of EIP-1559 reduced a portion of miners’ revenue, the proposal could stabilize Ethereum’s gas fee in the future. Meanwhile, as Ethereum-based applications continue to increase in number, Ethers will be burned at an increasingly faster pace, which could drive up the value of Ethereum over the long run. In particular, once Ethereum shifts to PoS, the TVL of the network will see a significant increase, and ETH will become deflationary.
Key Step 2: Specifications for the transition to PoS
In early October, the Ethereum team worked out the specifications for Ethereum’s transition to PoS (also called “the Merge”), which indicates that the team took another major step towards Ethereum 2.0. According to informed sources, the Merge is likely to be completed within the first half of 2022. By then, Ethereum will truly shift from PoW to PoS, which will help reduce energy consumption. Some researchers expect the energy consumption of Ethereum to drop by over 99% after the Merge. Once it transitions to PoS, Ethereum will usher into a crypto era that’s more sustainable and eco-friendlier.
Key Step 3: A new Ethereum 2.0 sharding design
The concept of sharding, which is a common technology in computer science, is not first proposed by Ethereum 2.0. It partitions a database into multiple parts called shards, each of which contains a small piece of the entire data set. In Ethereum 2.0, there will be 64 shards, and each shard is essentially an independent new blockchain that will process the load of the Ethereum network, which will fundamentally address the scalability problem of Ethereum relying on the significantly increased TPS.
Sharding boasts another major advantage: everyone will be able to run Ethereum nodes because each Ethereum node only needs to run on one shard once Ethereum is divided into 64 new chains, without having to store the data of the entire network. This significantly lowers hardware requirements. According to Ethereum, “you can even run an Ethereum node on your phone”. As such, sharding will attract more node participants, which will bring improved decentralization and security.
Recently, there have been many discussions about the Ethereum 2.0 sharding design in the Ethereum community, and many questions have been raised. Some believe that the original sharding design could be more concise. The new design proposed that the beacon block should also include all the shard blocks, and they will all be confirmed together by one committee (each committee member still only samples a small subset of the shard data). Of course, the design also faces other problems. If you are interested, you can always find out more about the sharding design for yourself.
Conclusion
In light of the current circumstances, Ethereum is progressing basically along the predetermined route. The launch of the Beacon Chain has laid a solid foundation for the merger of Ethereum. In 2022, Ethereum will witness the major upgrade from PoW to PoS. Let us wait for this iconic moment.