PROMISING SIGNALS.
Ethereum Merge is getting closer and closer. And this time - it looks like it’s happening not only in theory.
A new day begins, and I, the Crypto Owl, arrive at supersonic speed to deliver to you the freshest bits and pieces of what matters in the crypto sphere.
On Today’s Menu:
🍴BEEF BOURGUIGNON: Ethereum just completed its final test ahead of the Merge
🍜 STIR FRY: Solana’s having a bad time
🍊 O.J.: Celsius short squeeze drama continues
🍚 BASMATI RICE: Lovely news from bioXroute
🍰 APPLE CRUMBLE: Top crypto news
ETHEREUM ADVANCES
It looks like September 19th will truly go down in history as one of the most important crypto events to take place in the course of previous years. Delayed repeatedly, the merge began to look like a cloud of empty promises to many. But things are changing. And it begins to look like we’re about to witness history. Pretty. Damn. Soon.
So, the big thing here is the fact that Ethereum is getting closer to adopting a proof-of-stake model. Excluding the obvious benefits, such as reducing the entire blockchain’s energy consumption, this event will bring more changes than many expect. And the big news today is the fact that Ethereum just successfully ran its third and final test, which can be regarded as a rehearsal, before actually pressing the ‘update’ button. What does it mean?
To put it simply, here’s what happened. Ethereum simulated the process of transitioning to PoS from PoW on one of their test networks, or how they’re also called testnets. This particular testnet is called Goerli. And at the end of the test, Goerli fully transitioned into a Proof of Stake chain.
The test took place this Wednesday at around 9:45 PM ET. Ansgar Dietrichs, a researcher from Ethereum Foundation tweeted that the team viewed it as ‘another successful test’. Well, it looks like it. After all, at the end of it, it was proven that the proof of stake validation reduces the energy costs that are required for the verification process and also made it crystal clear that the merger mechanism does what it’s supposed to do.
So, what’s next? The testnets were merely bus stops. But the final destination is the Ethereum mainnet. The same process is expected to be implemented on September 19th, and on September 20th, the world will wake up to Ethereum completely running on Proof of Stake. As Tim Beiko, the coordinator for Ethereum protocol developers, said: “everything built on top of the network was ready for the transition.” Well… It better be. It even feels weird to understand that the word is about to become flesh!
What can we expect from it?
Good news quickly echoed throughout the crypto market. Immediately after the Goerli merge activation, Ether hit a 24-hour high of $1,912, and as of the moment of writing, Ether looks green on the price charts with an 11,40% increase and is worth around $1,886. So… Things are looking great for Ethereum. But does all of this hype have justification for it? Well, there’s a reason why the merge has been dubbed as one of the most significant events in DeFi history. Here are the main benefits that the merger will bring:
Ethereum will use 99.95% more power to secure the network than it currently does
Proof of work requires miners to invest and acquire expensive specialized hardware. Not only is it costly power-wise, it also creates a dependence on supply chains. What if something bad happened, and miners couldn’t replace their gear despite the urgent need for it? Proof of stake makes this dependency a thing of the past.
Proof of stake will make it easier for anyone to participate in the network’s security. It reduces the risk of centralization since the participating nodes won’t be squeezed in together in mining pools in particular locations.
Harmful and malicious actors will be punished. The more people participate in the staking, the more expensive it becomes for attackers to acquire most of the network. The crypto assets that are staked could be ‘slashed’ as a penalty if anyone chooses to join the dark side.
ETH issuance will drop from 4.3% to 0.43%. Now, this is a big deal. Essentially, this means that Ether will become less, if not completely, deflationary. The lesser the number of ETH in circulation, the higher its price.
So… Does that mean that ETH’s price will continue growing and growing? Well… Yes, and no. There are different prognoses, but only time will tell. Many signs are favorable, but some skeptics are not convinced. For example, ETH miners could attempt a hard fork, meaning they would kick off a new token that would remain based on the proof of work consensus mechanism. Or they could unite and align behind Ethereum Classic, another coin that forked from ETH in 2016. They could do it loudly by attracting everyone’s attention and making it look like it’s the real deal, and Ethereum’s PoS update was just a show. Yet… This is a very unlikely scenario, while other analysts predict that The Merge could result in ETH seeing its price quadrupling.
SOLANA’S HAVING A BAD TIME
A few days ago, CoinDesk published a report titled “The Fake Team That Made Solana DeFi Look Huge”. As the name suggests, there’s been some monkey business taking place in the Solana Land. Okay, so what do we know?
Apparently, there are two brothers who decided to run a risky experiment. For a while, things went according to plan. Their plan. But a lot was at stake. The trust of the entire DeFi community. And now, the truth has been unearthed. Okay, what gives?
So, these two brothers, Ian and Dylan Macalinao, set up 11 fake developer accounts and relentlessly communicated ‘news’ and ‘updates’ about how their projects are gaining speed inside the Solana DeFi ecosystem. The idea was simple: Solana DeFi is where it’s at. Things take place here, and you too better join the successful kids club. Otherwise, you’re missing out. It succeeded, and many people bought the fake hype. Because what they did is genuinely… majestic in a way. A bad way.
They coded several different DeFi protocols. Linked them together in a way that allowed them to count deposited funds… numerous times. And with the help of this scheme, they ended up with the ability to present pretty high numbers. The TVL (Total Value Locked, the overall value of crypto deposited in a DeFi protocol) skyrocketed and eventually represented almost $7.5 billion. This is around 75% of the entire TVL within the Solana DeFi ecosystem.
What does this teach us?
For starters, it’s yet another story about how anonymity can be abused. They operated pseudonymously, which was the most important condition for this whole ordeal to drag on for this long. This will change because, at its very essence, continuous and often recurring scams that happen with nameless people involved are simply unsustainable. It kills trust, it kills the momentum, and it leaves people disillusioned. This will not go on forever.
Secondly, this shows that this kind of stuff can only be the tip of the iceberg. Yes, Solana is still performing as one of the top coins, with its price dodging the bullet of a PR crisis. Yet all the other stuff that Solana proudly claims to be a unique trait of their blockchain… Will require some extra attention. People will be cautious and take Solana’s claims about their performance with a grain of salt. For example, whenever they talk about their proof of history consensus mechanism, which allows them to be blockchain leaders in terms of TPS (transactions per second), which is a whopping 50,000. Compared to Bitcoin, which processes around 5 transactions per second… Solana looks rather colossal.
But once again, thanks to the scam brothers, the trust is killed, the optimism got curbed, and this is a thing that Solana will have to deal with. Once again… Trust is gathered in spoons and spilled in buckets. Or something like that.
CELSIUS SHORT SQUEEZE DRAMA CONTINUES
There’s a ‘war’ going on. The Celsius (CEL) community is back at it again, and they’re having a standoff with those who are holding short positions. Hordes of Twitter users have been tweeting the #CelShortSqueeze hashtag to encourage more and more people to open a long position. So this is the gist of it. But… What do these fancy words mean?
Short-selling is a kind of strategy that allows investors to earn from the decline of a token or a share. This strategy consists of borrowing shares and then, once you’ve borrowed them, selling them immediately, hoping to purchase them back later at a lower price.
But what’s a short squeeze? It happens whenever the opposing side of investors starts purchasing a shorted asset en masse. This results in prices going up, contrary to short-sellers intentions, creating financial losses for them.
So what’s the relation to Celsius? What is currently taking place is yet another attempt by the Celsius community (or how they refer to themselves, Celsians), to drive the CEL price upwards. And short-sellers are the only obstacle in their way. Thus, a “war”. Now it makes more sense, doesn’t it? Okay, but what’s the background?
You may remember from our previous newsletters that in July, Celsius filed for something known as Chapter 11 reorganization. And when this happens, this can be interpreted as filing for bankruptcy. And this event was just the last straw on the camel’s back, since just days before that, Celsius’ customers were given the ‘joy’ of experiencing what a liquidity crisis feels like. They were unable to withdraw their funds from the now-infamous platform. And so today, Celsians continue their fight. The road may have been rocky, but thanks to united, collective action, they plan to push CEL price upwards. Well, we shall see!
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Disclaimer: This newsletter is strictly educational. None of this information is intended to be financial advice. Always do your research and act responsibly with your profits.