August 13, 2018, became one of the most unfavorable days in the last nine months for Ether (ETH), the second cryptocurrency in the world in terms of market capitalization, because the coin’s rate dropped to $260. Two days later, the co-founder of Ethereum Vitalik Buterin did not react to the drop in the value of the cryptocurrency and talked about his current developments and upcoming plans at a private event in San Francisco.
Sold and Falling
Last Monday at 4:50 PM international time, during the trading session, Ether dropped in price to below $300. This happened for the first time since November last year, then ETH was trading about $290, which is $10 to $30 more than now. Market capitalization has fallen by more than $10 billion, and losses in seven days have already amounted to more than 28 percent.
Probably, this collapse occurred due to the sale of ETH tokens by many blockchain startups. ICO projects started getting rid of the Ethereum cryptocurrency in the amount of about $40 million, which amounted to approximately 100,000 coins at the time. A large-scale selloff could be traced to completed transactions. The first to sell their coins were the representatives of the EOS team back in May 2018. After that, the market once again thought about the serious impact of public collection of ETH tokens, as it is too volatile and lends itself to general moods on ICO venues. Then other crypto teams also started selling their ETH. For example, the Atonomy project, which attracted money through an ICO, withdrew 12,000 ETH from its account, 9,000 of which were sent on July 26. The second-largest sale was done by AppCoins, which sold 8,400 ETH in one day. The remaining projects (unknown quantity) transferred amounts from 5,000 ETH and lower. The boom for sales happened because of the fall in the rate of the cryptocurrency, says crypto trader and founder of Onchain Capital, Ran Neuner.
"Spent the morning with an ICO (not to be named) they raised $30 million USD with a solid roadmap, they raised when ETH was $1200. They panicked and sold their remaining ETH last night, and now they have $4 million left," says Neuner. It is difficult to understand what kind of project it is, but one thing is clear that many ICOs exchange Ether for other currencies because of fears of losing investments.
The cost of ETH was most likely influenced by the July spam attack on the blockchain, when, due to the increased price for gas to $1, the number of transactions in the network decreased to 500,000 from the usual 1.4 million. High commission, as many experts believe, will lead the network into an unfit and unprofitable state. Ethereum allocated $15 million to reflect this spam attack, which, according to Vitalik Buterin's words and calculations, would be enough to buy "5 million packs of green tea, 75 Lamborghinis, 25 rounds of initial financing for Coinbase, or 0.9 percent of the Telegram ICO."
The forecasts for the rate of ETH do not inspire confidence and tranquility in the users and organizers of projects on the Ethereum blockchain. Executive director of the BitMex exchange, Arthur Hayes, emotionally criticized the coin and said that its disappearance is inevitable because it is a “shitcoin,” a coin that is of no value and does not do any good, and not a true cryptocurrency. In addition, according to the expert, the price of ETH will drop to $100 and lower to the marks of the spring of 2017, because the ICO boom has long passed, and therefore, there is no need to expect a new flow of investments.
"The herd of token VC punters will all decide to sell at the same time. If you don’t sell, and the market continues falling, you lose your job. So everyone sells simultaneously but who can eat all that shit? Retail cannot because the deals would never have gotten so large without institutional money. So we go lower, first in tokens, then in the mothership of Ether," Hayes said categorically.
Vitalik Buterin himself does not deny that ICO projects on Ethereum "have become very boring and uninteresting,” so it is no surprise that the demand for them is disappearing and the platform is becoming less popular than in 2017.
And What Does Buterin Have to Say?
Vitalik Buterin, co-founder of the Ethereum platform, whose token is ETH, spoke about his plans and current work at a private event last week.
"Lately, I've been testing the protocols on Proof-of-Stake and improving the sharding protocol. The entire Ethereum research community pays much attention to these technologies. We believe that the PoS algorithm and network scaling are indeed very important, and in the last couple of months, significant progress has been made in improving algorithms and developing numerous limitations," Buterin said and added that he also considers the economic analysis of transaction fees and transaction commission algorithms and how they can be improved by reducing fees and increasing efficiency. "This is the main thing I'm working on right now. I really wish that soon all the cryptocurrencies abandon the PoW protocol," Vitalik said.
Soon, they will start implementing the Casper technology from the development of the level 2.0 network, which will implement the transition of the Ethereum blockchain system from the Proof-of-Work consensus algorithm to the Proof-of-Stake. "Casper is at the final stage and is waiting for an academic analysis," said Buterin. This was already said in June, however, at a conference in Hong Kong by another co-founder of the platform, Joseph Lubin.
For a detailed description of the entire system and upcoming innovations in the network, Vitalik launched a "tweet storm" on his Twitter page, which is similar to the widespread thread in the network "one like one fact.” See all of the 75 messages about Ethereum here. Note that virtually every message contains an additional reference to the materials from the developers, which further explain the future functionality of the blockchain.
Also, Buterin touched on the problems of trust in the blockchain system and its confidentiality. The creator of Ethereum believes that the technology is still not used in full measure, and the hype surrounding new features and opportunities does not allow the network to develop further. In addition, the preservation and non-disclosure of data are far from ideal. "Currently, there are no good ways to use the lockup mechanism while maintaining privacy. Considerable efforts have been made to solve this problem, for example, using Zcash, and Ethereum studies have also been conducted. Nevertheless, there is also a way to declassify confidential data on the blockchain," Vitalik believes.
During the discussion, questions were raised about the regulation of cryptocurrencies. According to Buterin, normative openness is required, which will focus on ways of facilitating the use of small quantities of crypto coins in everyday life. "I just want to go to a store and start using Bitcoin Cash with the help of a card. Granting a small number of coins for users will begin to develop the crypto industry and the blockchain itself, which goes beyond cryptography. After all, even now, non-financial cases of blockchain use still require transaction fees. If we can reduce this deficit with one purchase in a supermarket, the use of cryptocurrencies will be easier," Buterin said and added that the governments of the countries need first to understand the value of the blockchain and its benefits and only then to introduce it into the system.
In the Ethereum blockchain, large-scale changes are imminent, which will dramatically change the operation of the network. Perhaps, the falling rate of ETH is a marker of instability and immediate innovations that should improve the situation in the work of the blockchain and stabilize the value of the cryptocurrency at the proper level.