There aren’t many crypto projects out there that can say they’ve had a particularly good year, but Ethereum has possibly had one of the worst. With its price being only $92 as of today in another devastating flash crash it would be fair to ask is it heading to zero?
Co-founder Vitalik Buterin agreed with a journalist on Reddit that if Ethereum could be worth nothing if it doesn’t evolve.
Well, it looks like that evolution may be here. The Constantinople hard fork is set to occur in January. What is the Constantinople hard fork? How will adjusting the block reward help? Is Ethereum able to turn things around this coming year? Or is it too late? Could Ethereum be heading for zero anyway? To find out let’s take a look.
As a point of transparency, I do hold some Ethereum and move in and out of it for trading pairs as do most people.
It’s been argued quite convincingly that Ethereum’s value comes from the amount of ICO’s that operate on the platform. If it was the ICO boom that funded Ethereum’s meteoric rise, then it would make sense that it would lose so much of that value as the popularity and interest in ICO projects wanes.
Then there is the issue of scalability, and that’s something that a lot of cryptos have to look at. Ethereum is quite slow and when the short-lived Cryptokitties came out, it really caused slowdowns of the transaction speed for the network.
Ethereum has competition too, EOS is operational now and has seen gains in popularity among developers and even saw a 16% surge in price just this weekend. But quite possibly, the biggest threat to Ethereum now comes from Tron. Tron has launched its mainnet and allows for Dapps to be programmed in Java and to add more to the threat founder Justin Sun has offered funding to help developers migrate their Dapps from Ethereum over to Tron.
The planned difficulty bomb is also a big problem for Ethereum. It was implemented in preparation for a move to proof of stake model, and it’s something that’s been talked about in the Ethereum community for some time. The level of difficulty to the cryptographic calculations that miners have to solve in order to generate a reward is increasing. It’s increasing at such a speed that it’s becoming more challenging to earn Ether and more expensive. If it continues along that path, it will become unprofitable to mine, and when that happens, it could spell the end for Ethereum. The difficulty bomb was planned so that miners are forced to switch over to proof of stake only, but the problem is proof of stake isn’t quite ready.
In order to save Ethereum, the developers would need to implement one of two solutions. The first one is to implement Proof of Stake, something that has been on the cards for a while. Once on Proof of Stake, the rewards will be distributed based on existing Ether ownership. The more Ether someone stakes, the more likely they are to be rewarded.
The second option is to improve the proof of work model by introducing sharding. This would be where the entire blockchain or network is split at a given time into partitions called shards. Certain nodes would then process transactions within certain shards, therefore, reducing the need for massive data sets and increasing the transaction speeds.
Constantinople is the solution to the problem but only a temporary one. There are five Ethereum Improvement Proposals that are being implemented as part of the hard fork. These proposals will improve processing efficiency on the blockchain, a better scaling solution based on “off-chain” transactions, optimization of large-scale code executions, and most importantly, a reduction in the mining rewards from 3 Ether to 2 Ether per block and a 12-month delay of the difficulty bomb.
These changes may well bring stability improvements to the network and give miners more time to prepare for the switch to proof of stake. This hard fork could buy Ethereum enough time to regain its standing in the cryptocurrency space. The only question is whether the switch to proof of stake happens in time. Further delays could see developers and investors leave the platform for the likes of Eos and Tron who are actively poaching developers from the Ethereum network.
If Ethereum can survive the 12 months and launch the proof of stake model, we could see the price of Ether rise quite substantially but a further delay or exodus of developers and investors during that period could end it for Ethereum. Constantinople is a temporary solution to problems Ethereum needs to solve if it is to avoid a plummet to zero. Right now Ethereum is on life support and there’s a good chance the plug could be pulled off.
What are your thoughts on Ethereum? With Vitalik distancing himself from his own project in recent months do you still have faith in it? Do you think EOS or Tron will win out or can Ethereum can fight it’s way back? Let us know in the comments below. We would really like to hear your thoughts on the stories we run so, please get involved.
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Disclaimer: Cryptopig content is written by a team of blockchain passionate people. We are not registered as investment advisors. Don’t take the information in this post as investment advice and make sure you do your own research before investing. Cryptocurrencies are a very risky investment, never invest more money than you can afford to lose.