As Bitcoin goes through its 4th pivotal halving event, the landscape of cryptocurrency has transformed significantly. This new financial territory brings key changes and developments surrounding Bitcoin’s halving, from the unprecedented pre-halving price surges to the enhanced global decentralisation and security of its network
Bitcoin halving has catalysed a surge in crypto adoption
Since the Bitcoin halving event in May 2020, the number of people using cryptocurrencies worldwide has skyrocketed by at least 400%, growing from about 100 million to nearly 580 million users by the end of 2023.
This dramatic increase in user base is drawn from estimates by the Cambridge Centre for Alternative Finance and Crypto.com.
Although the rate at which new Bitcoins are generated has slowed down due to the halving process, global interest and adoption of cryptocurrencies have not decreased.
As of early 2024, data suggests that roughly 2.7% of the world’s population owns Bitcoin, amounting to about 219 million individuals.
This represents a significant rise—approximately 208%—from the 71 million Bitcoin users estimated four years earlier. It’s important to note, however, that these figures are estimates; accurately gauging the exact number of Bitcoin or other cryptocurrency users is challenging.
Factors like the inability of on-chain transaction analysis to distinguish between active users, long-term holders, and lost coins make precise counts difficult.
The 2024 pre-halving period has shown unprecedented growth in Bitcoin’s price, marking a distinct difference from the previous three halving events.
Historically, significant price surges in Bitcoin occurred after the halving, with new all-time highs typically forming about a year later.
For instance, before the 2020 halving, Bitcoin did not surpass its previous peak of $20,000. It only exceeded this mark 10 months post-halving.
However, the scenario has dramatically changed in the current cycle.
Bitcoin achieved a new all-time high just before the upcoming halving, hitting a record price of $73,600 on March 13, 2024. This kind of price action prior to a halving is unprecedented and has been noted by several analysts.
How Bitcoin miners are better positioned ahead of the 2024 halving
This time around, the unprecedented surge in Bitcoin’s price before the halving may have bolstered the mining industry, granting miners greater control over their operational costs.
Miners seem to be in better financial standing compared to previous halving cycles, with reduced debt levels and improved cost management, particularly in electricity expenses.
Moreover, the price appreciation preceding the halving is a novel occurrence in Bitcoin’s history, providing an additional boon to miners.
Since the third halving in May 2020, Bitcoin’s mining energy consumption has notably risen, reaching 99 Terawatt hours (Twh) by April 18, 2024. Despite this increase, there’s a positive trend in the utilisation of renewable energy sources for Bitcoin mining, accounting for 54.5% of the network’s energy consumption as of January 2024, up from 39% in September 2020, according to Bitcoin ESG Forecast and CCAF data, respectively.
The first Bitcoin halving with active spot ETFs in the U.S.
The 2024 Bitcoin halving stands out as the first to occur alongside active spot Bitcoin ETFs (exchange-traded funds) in the United States, marking a significant evolution in Bitcoin investment accessibility.
These ETFs, which began trading in January 2024, have opened the doors for institutional investors to engage more directly with Bitcoin.
Bloomberg’s ETF analyst, Eric Balchunas, reported that these spot Bitcoin ETFs have achieved “blockbuster success,” indicating a sharp rise in Bitcoin demand. Since their inception, the combined holdings of all ten spot Bitcoin ETFs have increased by at least 220,000 BTC, valued at approximately $14 billion.
Missed this earlier but looks like BlackRock and Pimco have filed for mutual fund to ETF conversions, joining about 70 funds so far with $100b to convert. MF cos looking to exploit all three roads to ETFville: clones, conversions and classes = bullish https://t.co/fqzMCG8cj5
Among these, BlackRock’s spot Bitcoin ETF has seen the most substantial inflows, with its holdings skyrocketing more than 10,000% from an initial 2,621 BTC to 273,140 BTC as of April 18.
As for the broader market dynamics, while the halving is significant, it should be viewed as part of a larger narrative that includes ETFs, quantitative easing, and other factors shaping the market’s future.
Bitcoin’s global decentralisation and enhanced security
Bitcoin’s network has seen substantial improvements in security and decentralisation over the past few years.
Previously concentrated primarily in mainland China, where nearly 80% of the mining activity took place as of 2020, the Bitcoin mining landscape has now become significantly more global.
As of February 2024, the United States leads with 40% of the total mining hash rate, followed by China and Russia, which contribute 15% and 12%, respectively, according to Hashlab Mining.
This shift toward geographic decentralisation continues as miners explore regions like Africa and Latin America, which are attracted by lower electricity costs.
Moreover, the security of the Bitcoin blockchain has dramatically increased; its hash rate has quintupled since the last halving, making the network much more robust against attacks.
Now, it requires five times more computing power and associated resources such as electricity, infrastructure, and hardware to pose a threat to the network.
Explore the intricate interplay between Bitcoin’s price movements, economic indicators, and trader behaviors in this detailed analysis.
As the cryptocurrency market approaches a pivotal moment with the upcoming Bitcoin halving, understand the factors influencing price trends, including leverage risks, regulatory impacts, and broader economic conditions.
Gain insights from expert predictions and strategies to better understand how global financial trends and internal crypto dynamics could shape the future of Bitcoin’s valuation.
Exploring the Link Between Bitcoin, S&P 500, and Economic Indicators
The relationship between Bitcoin‘s price movements, the S&P 500 index, and broader economic indicators is a complex interplay that reflects broader market sentiment and investor behaviour. This connection can be understood through several key dynamics:
Market sentiment and risk appetite
Bitcoin and the S&P 500 often react similarly to changes in global market sentiment.
During times of economic optimism, both markets tend to rise as investors are more willing to take on riskier assets. Conversely, economic downturns or market uncertainties often lead investors to pull back from both equities and cryptocurrencies, which are considered risk assets.
For example, significant drops in the S&P 500 due to economic fears or poor corporate earnings often coincide with declines in Bitcoin’s value as investors seek safer holdings.
Inflation and Monetary Policy
Bitcoin has been characterised by some investors as a “digital gold,” akin to a hedge against inflation.
The cryptocurrency’s limited supply contrasts with fiat currencies that can be printed without limit. When inflation fears rise, as indicated by economic indicators like CPI (Consumer Price Index), or when the Federal Reserve signals tighter monetary policy by raising interest rates, both the S&P 500 and Bitcoin can be affected. Stocks generally react negatively to high inflation and higher rates, which can also increase the appeal of Bitcoin as an alternative investment.
Liquidity and market dynamics
The Federal Reserve’s monetary policy also impacts liquidity in financial markets. Lower interest rates and quantitative easing generally increase market liquidity, making funds available for investment in both stocks and cryptocurrencies, leading to potential price increases in both markets.
Conversely, quantitative tightening reduces liquidity, which can lead to lower prices. Bitcoin’s reaction to these policies can be swift, mirroring or even exaggerating the movements seen in the S&P 500.
Investor behaviour and technological adoption
The increasing adoption of blockchain technology and the integration of cryptocurrencies into traditional finance (like Bitcoin ETFs and futures) further intertwine the performance of Bitcoin with traditional stock markets.
As institutional investors enter the crypto space, their investment behaviours — often driven by the same factors influencing their stock market investments — can lead to correlated movements between Bitcoin and the S&P 500.
Geopolitical and economic uncertainties
Global events such as geopolitical tensions, trade wars, or pandemics can influence both the stock market and Bitcoin prices.
For instance, during times of heightened uncertainty, there may be an increase in Bitcoin buying as a hedge against global instability, even as stock markets might falter due to risk aversion among traditional investors.
Understanding the nuanced relationship between Bitcoin, the S&P 500, and economic indicators not only helps in assessing the risk and opportunities inherent in both markets but also in strategizing investments that can withstand or capitalize on the interconnected volatility of these asset classes.
Trading crypto during this turbulent period
During this turbulent period in the crypto market, traders are expressing a mix of caution and strategic optimism. Here’s a snapshot of the prevailing sentiments and strategies among traders:
Caution over leverage. The recent liquidations of leveraged positions have served as a stark reminder of the risks involved. Traders are advising against over-leveraging and are emphasising the importance of risk management to withstand sudden price swings.
Don’t use leverage – at least not without a stop loss.
Using leverage is the only way to send your portfolio to 0, and to then miss out on the rest of the bull market.
If you are trading spot you’re down. So what. If you get liquidated you’re out of the game entirely.…
Market volatility. The unpredictable movements make it essential for traders to stay very active and responsive, adjusting their positions as the market changes.
Strategic patience. Experienced traders are advocating for a more cautious approach, suggesting that sitting out the high volatility might be wise. They believe that waiting for clearer signs or more stable conditions could prevent losses and lead to better opportunities in the future.
Market will go through a big shakeout.
Majority of alts are already down 40%-45% from their recent highs.
They'll most likely get to 50%-70% retracements across the board by the time we're done.
Optimism for post-halving gains. There is a strong sense of optimism regarding the upcoming Bitcoin halving. Some traders, like Andrew Kang of Mechanism Capital, predict that the reduced supply of Bitcoin resulting from the halving will lead to significant price increases, potentially reaching new all-time highs.
Diversification. With the current uncertainties, some traders are looking at diversifying their investments beyond just Bitcoin and Ethereum. They are exploring other cryptocurrencies and blockchain projects that might offer better stability or growth potential in the current environment.
Economic indicators. Traders are closely monitoring broader economic indicators, especially inflation rates and actions by the Federal Reserve, as these factors are seen as key drivers for both the stock market and cryptocurrency prices. Their strategies often involve adapting quickly to economic news that could affect market sentiment.
The second scenario, the impulsive wave: is that we roll over here and we are in the midst of a 5 wave impulsive move down, either way there's so much liquidity being formulated below is would seem pretty unlikely to me that we would not unlock all that liquidity from stop losses… pic.twitter.com/UCQr9iuNUh
As we navigate through a period of significant volatility and anticipation in the crypto market, various traders and analysts have shared their expectations for Bitcoin’s future. These insights combine optimism with caution, reflecting the complex factors influencing the market.
Post-halving surge
The upcoming Bitcoin halving is a focal point of discussion. Andrew Kang of Mechanism Capital is notably optimistic, predicting that Bitcoin’s price could ascend to new all-time highs, potentially reaching $80,000 by May. This optimism is grounded in Bitcoin’s historical performance following previous halvings, where reduced supply typically led to price increases due to the heightened scarcity of available coins.
Whale activities and market impact
The activity of Bitcoin whales—large holders capable of influencing market dynamics through substantial transactions—is also a key indicator to watch. Recent data suggest that whales are accumulating Bitcoin, possibly in anticipation of price increases post-halving. This trend could provide upward pressure on prices if it continues, signaling strong demand overcoming the reduced supply.
Economic indicators and external influences
Economic announcements, particularly regarding inflation and Federal Reserve policies, have recently impacted Bitcoin’s price.
Traders should continue to monitor these indicators as they provide a critical context for Bitcoin’s behaviour in relation to broader financial markets.
For instance, if inflation remains high, Bitcoin may increasingly be viewed as a hedge, similar to gold, which could boost its price further.
Volatility and trader behaviour
Despite the optimistic projections, seasoned traders like Honeybadger express a more cautious stance, suggesting potential price volatility could lead to unexpected market movements. This sentiment is echoed by others who advise against over-leverage and recommend waiting for more stable market conditions to avoid the risks of sudden price reversals.
Long-term trends
Looking further ahead, the integration of blockchain technology and broader financial acceptance of cryptocurrencies may bolster Bitcoin’s position as a mainstream asset. This could lead to greater stability and less susceptibility to sharp market movements compared to the current landscape.
Let’s delve into the world of decentralised stablecoins to get more clarity on a concept that marries cryptocurrency flexibility with traditional financial stability.
What is a stablecoin?
A stablecoin is a type of cryptocurrency designed to have a stable value, unlike other cryptocurrencies like Bitcoin or Ethereum, which can see their prices fluctuate wildly.
The idea behind stablecoins is to combine the best of both worlds: the stability of traditional money, like dollars or euros, and the flexibility and security of digital currencies.
Stablecoins achieve their stability by being pegged to something with a stable value, such as a widely used currency (like the US dollar) or a commodity (like gold). This means one unit of a stablecoin is meant to always be worth the same as the asset it’s tied to. For example, one stablecoin pegged to the US dollar aims always to be worth exactly one dollar.
This stability makes stablecoins particularly useful for people who want to use digital currency for everyday transactions, like buying coffee or sending money to friends, without worrying about the value of their currency going up or down dramatically in a short period.
It also makes them a popular choice for traders and investors in the cryptocurrency world who are looking for a safe place to store their assets during turbulent market conditions.
According to DeFiLlama, as of April 2024, the total stablecoins market cap has risen to $154.66 billion. However, this value includes both decentralised and centralised stables. The dominant stable is USDT, a centralised stablecoin.
USDT, or Tether, stands out in the cryptocurrency world due to its centralised nature, meaning it is issued and managed by a single entity, Tether Limited.
This central authority holds reserves in traditional fiat currencies, like the US dollar, to back and stabilise the value of USDT, ensuring that it remains pegged 1:1 with the dollar.
This centralisation contrasts with decentralised cryptocurrencies, where control is spread across a network of users. The centralised approach of USDT provides users with the perceived stability of traditional financial systems while enabling the flexibility of digital transactions.
However, it also introduces reliance on the trustworthiness and solvency of Tether Limited, making its transparency and regulatory compliance crucial to users’ confidence.
What is a decentralised stablecoin?
A decentralised stablecoin is a special kind of digital money that aims to keep its value steady, just like regular stablecoins.
What sets it apart is how it operates without being controlled by any single company or government. Instead, it uses a network of computers and sophisticated software to manage itself.
Imagine a community garden where everyone contributes and decides together how to take care of it, rather than one person owning it and making all the decisions.
In a similar way, decentralised stablecoins are managed by a community of users following rules written in computer code. These rules help keep the stablecoin’s value consistent, often by linking it to something stable like the dollar or gold.
This approach offers a couple of big benefits.
First, it can reduce the risk of a single point of failure, like if a company managing a stablecoin goes out of business.
Second, it promotes transparency and fairness, as everyone can see and understand how the stablecoin is managed.
Decentralised vs centralized stablecoins
Comparison criteria
Decentralised Stablecoins
Centralised Stablecoins
Control and Governance
Operate based on smart contracts and are often governed by community decisions or a DAO.
Managed by a single entity, such as a company, which is responsible for maintaining the stablecoin’s value and reserves.
Transparency and Trust
Transparency is provided by the blockchain and smart contracts, allowing public verification. Trust is placed in the code and the governance model.
Trust is placed in the issuing company to hold sufficient reserves, with varying degrees of transparency and external audits.
Reserve Management
Use other cryptocurrencies, algorithmic methods, or combinations thereof to maintain their peg, minimising reliance on traditional systems.
Typically backed by traditional assets (fiat currencies, gold, etc.), managed by the issuer.
Regulatory Oversight
Faces a complex regulatory landscape due to its distributed nature, which can both pose challenges and offer resistance to regulatory pressure.
They are more likely to be regulated and comply with financial laws, given their ties to traditional financial entities and assets.
Accessibility and Integration
It may offer innovative features within the DeFi ecosystem but might be less accessible to newcomers due to its complexity.
Often offer easier integration with traditional financial systems and are generally more accessible to the general public.
Top decentralised stablecoins
It’s important to note that most stablecoins used by crypto traders are mostly centralised stablecoins.
USDT (Tether), USDC (USD Coin), TUSD (TrueUSD), BUSD (Binance USD), and PAXG (Pax Gold) are generally considered centralised due to their backing by specific companies or organisations that maintain control over their issuance and backing reserves.
FRAX, DAI, and others like FDUSD, USDE, and XAUT offer more decentralised aspects. Here’s a closer look:
DAI – DAI is pegged to the US dollar and maintains stability through over-collateralization with cryptocurrencies on the Ethereum blockchain. It is governed by the MakerDAO protocol, allowing DAI holders to participate in decision-making.
FRAX – FRAX is a partially collateralised stablecoin that aims to provide a highly scalable and decentralised stablecoin solution. It operates on the Ethereum blockchain and maintains its peg through a combination of collateral and algorithmic mechanisms, adjusting its collateral ratio based on market conditions.
FDUSD(Fiat DAO) – FDUSD is part of the Fiat DAO ecosystem, aiming to provide a stable and decentralised currency solution. It is designed to work within the DeFi ecosystem, offering stability through mechanisms that allow it to respond to market dynamics, although detailed specifics about its pegging strategy and blockchain basis are less commonly known compared to more established stablecoins.
USDE – USDE (Ethena USDe) is an example of a decentralised stablecoin with unique mechanisms for maintaining its peg, often involving algorithmic approaches or community governance for stability. The specifics of its operation, including the assets it is pegged to and the native blockchain, can vary based on the project’s development and governance model.
XAUT (Tether Gold) – While Tether’s USDT is centralized, XAUT offers a different approach by being a digital token backed by physical gold. It represents one troy ounce of gold on a London Good Delivery bar. However, the management and issuance by Tether might still place it in a more centralized category compared to purely decentralized finance (DeFi) projects.
It’s important to distinguish between the operational models of these stablecoins, especially in terms of decentralisation and the mechanisms they use to maintain their peg.
If you intend to invest in crypto or store funds in decentralised stablecoins, consider using eToro, Binance or Wirex, three highly reliable centralised crypto platforms.
In the vast and volatile ocean of the cryptocurrency market, there exists a creature of immense power and influence: the crypto whale. Much like their namesake in the natural world, crypto whales are entities or individuals who hold a colossal amount of cryptocurrency.
They are the big players whose investments are so significant that their trading movements can cause ripples or even tidal waves across the market, influencing prices and trends in ways that affect every other participant.
What is a crypto whale?
A crypto whale is someone who owns a huge amount of cryptocurrency. It’s called a whale as it may resemble a real whale, which s a huge creature in the ocean.
Because they have so much crypto, these crypto whales can make big moves in the market. If they decide to buy a lot of one type of cryptocurrency, the price can go up because there’s a lot of demand all at once.
If they sell a lot, the price can drop because it looks like there’s a lot of that crypto available all of a sudden.
Essentially, crypto whales are important because their actions can change the prices in the cryptocurrency market very quickly, influencing how much your cryptocurrency is worth.
Who exactly qualifies as a whale?
While there’s no exact threshold, it’s generally agreed that these are holders of enough digital currency that their buy or sell orders can single-handedly move market prices.
This might mean owning thousands of Bitcoins, millions in Ethereum, or equivalent amounts in other digital currencies.
The impact of crypto whales on the market
Many talk about the crypto whales because they can dramatically sway market prices in one direction or another.
These market movements are not just numerical changes on a screen; they can have real effects on other investors.
For instance, a sudden price drop caused by a large sale can trigger panic selling among smaller investors, further driving down the price.
On the other hand, a price increase might encourage more buying, creating a snowball effect that pushes the price even higher.
However, not all impacts of whale activity are negative or manipulative. Sometimes, whales can bring stability to a market by using their substantial holdings to prevent drastic price swings. For instance, they might buy up a cryptocurrency when its price drops to a certain level, providing a safety net that can reassure other investors and stabilise the market.
Luckily, crypto transactions are all recorded on the blockchain. That’s how we can all check the current crypto whales and observe in real-time any sudden massive crypto transactions.
Of course, we can only see the wallets belonging to these whales, but we can’t tie them to a particular person. Also, we cannot know if one or more wallets belong to the same individual. Understanding how the blockchain works will offer great insight into how to interpret the data offered by this technology.
How to identify crypto whales
Identifying the movements of crypto whales is key to understanding market dynamics, yet it requires access to specific tools and platforms designed to track and analyze vast amounts of transaction data across different blockchains.
Blockchain explorers
These platforms allow users to view real-time transactions on their respective blockchains, including the amounts transferred and the wallet addresses involved.
By monitoring large transactions, one can infer potential whale movements. For example, a single transaction involving thousands of Bitcoins or a similar magnitude of another cryptocurrency could signal whale activity.
Etherscan.io: Offers a comprehensive look at Ethereum transactions, wallet addresses, and smart contracts.
Blockchain.com/explorer: Provides detailed information on Bitcoin transactions and has features for tracking other cryptocurrencies like Ethereum.
These are just some examples. Such a blockchain explorer exists for any blockchain. You can simply search for the “name of the blockchain” + “explorer” on Google and you will find the corresponding blockchain explorer.
Crypto analytics platforms
Specialised analytics platforms offer more nuanced insights into the crypto market, including the tracking of whale movements. These services analyse blockchain data to highlight large transactions and potentially link them to known whale accounts or institutions.
Whale Alert (@whale_alert on X): Known for real-time alerts on large cryptocurrency transactions across various blockchains, helping to identify potential whale activities.
CryptoQuant: Offers a range of metrics and indicators, including exchange inflow/outflow, which can indicate potential sell/buy pressure from whales.
Social media and forums
Social media platforms and cryptocurrency forums are also rich sources of information and speculation regarding whale activities.
Communities on Reddit (such as r/CryptoCurrency), X (former Twitter), and specialised forums often discuss large transactions and potential whale movements, providing context and interpretations that may not be immediately apparent from raw data alone.
Crypto wallets and transactions
Identifying a whale involves more than just spotting a large transaction.
It’s about recognising patterns over time, such as repeated transactions from the same wallet address or significant amounts moving in response to market events.
Wallets holding large amounts of cryptocurrency often belong to individuals, exchanges, or institutional investors, each influencing the market in different ways.
While the tools and platforms mentioned provide valuable insights into whale activities, interpreting this data requires a nuanced understanding of the market. Observing transaction patterns, understanding the context of large movements, and staying informed through community discussions are all crucial for those looking to navigate the crypto waters influenced by whales.
Crypto whales are important
Understanding the role of crypto whales is crucial for anyone involved in cryptocurrency.
Their actions can serve as indicators of market trends, offering insights to savvy investors who keep an eye on whale movements.
By recognising the signs of whale activity, investors can make more informed decisions, navigating the crypto market with a better understanding of its underlying dynamics.
Solana is showing signs of potentially surpassing Ethereum in terms of consumer decentralized applications (DApps), as noted by Solana Foundation’s former head of growth. Despite current market challenges, Solana’s unique features could lead to increased developer activity and user adoption.
Matty Taylor, co-founder of Colosseum and previously part of the Solana Foundation, shared that he believes the Solana blockchain is going to become more popular than Ethereum, especially for regular users.
He said that Solana has been doing better than Ethereum in attracting user-friendly apps that fit with the modern web, thanks to its ability to handle transactions quickly and efficiently.
Currently, according to DappRadar, Ethereum has about 4,520 decentralized applications (Dapps), which is considerably more than the ones on Solana (240).
But even so, Solana has kept its nickname over the years, as it is often mentioned as a potential “Ethereum-killer.” This is because Solana can process transactions faster and more efficiently than Ethereum.
The collapse of FTX and the subsequent market downturn were major challenges for Solana, but according to Matty Taylor, these events actually brought more developers to the platform, even as the value of Solana’s SOL token dropped.
Taylor pointed out that every major blockchain network, including Bitcoin with its Mt Gox incident and the 2020 market downturn, has faced tough times. He believes that Solana has emerged from these challenges stronger and with a growing number of developers.
Despite these advancements, Ethereum still leads significantly in the crypto space.
As of March 2024, according to DefiLlama data, the total value locked (TVL) on Ethereum is $50.5 billion, more than 11 times Solana’s TVL of $4.34 billion.
Additionally, Solana faced technical issues when its blockchain stopped producing blocks for over five hours on February 6, forcing a network restart by its validators. This was not the first time; Solana has experienced several notable disruptions since January 2022.
Matty Taylor explained that while network problems are usually bad for any system, blockchains trying to expand their capabilities will naturally face some challenges. He mentioned that it’s better for these issues to occur now rather than later, especially before large, critical funds like pensions begin to rely on blockchain technology. He admitted that while it’s not ideal, these challenges are part of the innovation process.
Ethereum vs Solana dApps
There is no doubt that Solana is becoming a serious competitor to the already established Ethereum blockchain.
According to DappRadar, the top 10 Dapps are divided between Ethereum and Solana. Three of these are native to Solana, six are Ethereum-based, and one (Magic Eden NFT marketplace) supports both blockchains.
However, it’s worth pointing out that the UAW (Unique Active Wallets) interacting with these apps seems to be increasing on the Solana-based Dapps.
Raydium, the Solana-based DEX, has taken the lead with over 1.15 million unique addresses in the last 30 days. This is almost double that of the most popular DEX in the crypto space, Uniswap. However, the top from DappRadar counts Uniswap V3, V2 and the NFT aggregator as separate Dapps, but there’s no way of knowing if those aren’t the same addresses on both Uniswap V3 and V2.
According to CoinMarketCap, Solana (SOL) registered a price surge of over 78% during the last month, reaching a trading price of about $185 at the end of March 2024.
This sharp increase, together with its latest tech developments, played a pivotal role in last month’s TVL increase for its top protocols. Here’s a screenshot from DefiLlama of the top protocols on Solana, sorted by their TVL (total value locked).
Stablecoin dominance
Stablecoins are another way to measure how relevant a blockchain really is. Investors and day traders will often use stables, such as USDT and USDC to safeguard their trading profits from the market’s volatility.
While Ethereum still maintains its sovereignty, being responsible for over 52% of all stablecoin transactions, Solana ranks as the 4th blockchain for stablecoin trading, with a 1.86% dominance of the total market share.
Source: DefiLlama, Total Stablecoins Market Cap Dominance
Here is a breakdown for each of the top blockchains for trading stables.
Solana is gradually growing in volume and market capitalization, experiencing more than a 4% increase over the last week. It appears that Solana is steadily outpacing Ethereum. If this trend continues, it will not be a matter of if but rather a question of when.
The Ethereum Dencun upgrade, combining Deneb and Cancun updates, introduces significant changes to enhance scalability and reduce fees. This upgrade, crucial for Ethereum’s future growth, facilitates cheaper transaction storage off-chain.
What is Ethereum Cancun-Deneb (Dencun) upgrade?
Dencun combines two updates called Deneb and Cancun into one big change for Ethereum, touching both the part of Ethereum that reaches agreements (consensus layer) and the part that handles transactions (execution layer).
The Dencun upgrade also brings a feature called Proto-Danksharding through EIP-4844, aiming to lower the costs for layer 2 (L2) storage solutions. It introduces a new kind of temporary data storage called “blobs,” which helps in making storage cheaper for rollup providers.
Proto-danksharding is an early step towards full danksharding. It allows layer-2 solutions on Ethereum to keep large transaction data off the main network, similar to using a temporary storage space. This helps reduce costs for users of layer-2 solutions by keeping the main Ethereum network less cluttered and reserved for crucial transactions.
These blobs stay available on the network for about 18 days, or 4096 epochs, after which they are removed. However, even after removal, the validity of the data can still be checked with certain proofs.
This is a major system update in blockchain, and it started at a specific time in Ethereum’s history, rolling out completely in 15 minutes. This update aims to cut down fees for certain transactions and enable Ethereum to handle more activity.
Deneb focuses on improving the agreement part of Ethereum, making sure everyone on the network agrees on what’s happening.
Cancun upgrades how transactions are done, making them smoother and more efficient.
This addition is expected to significantly lower rollup costs, control the size of the blockchain, and accommodate more users while keeping the network secure and decentralized.
This big change comes after another important update last year, which let people take their Ethereum out if they had put it into the network before.
What will happen after the Ethereum Dencun upgrade?
Lower fees from rollups
This feature started on March 13, 2024, at 1:55 PM UTC, from epoch 269568.
Major rollup providers like Arbitrum and Optimism have announced they will start using the new blob feature right after the upgrade.
However, the exact time when each rollup will start showing lower fees might differ because each provider needs to update their systems to use the new blob space.
Off-chain transactions to keep the network costs low
The Dencun upgrade makes Ethereum better by allowing it to handle more users and transactions without raising costs too much. It also keeps the network spread out and not controlled by just a few.
Ethereum is focusing on improving “layer 2 rollups.” These are systems that help handle more users safely.
Rollups work by doing transactions separately and then sending a summary or proof back to the main network. This process costs money, which was high before because every network user had to keep the information forever.
The Dencun upgrade introduces Proto-Danksharding, making it cheaper to store these summaries. Now, they only need to be kept for about 18 days, reducing costs. Since rollups need about 7 days to handle withdrawals, the new 18-day limit is more than enough, keeping everything secure without needing more computer storage.
Impact all Ethereum consensus and validator clients
The Proto-Danksharding update (EIP-4844) requires changes to both the systems that carry out transactions and the ones that help agree on the network’s state.
All the main programs used by Ethereum have been updated to reflect this change.
People running these programs need to make sure they’re using the latest version to stay connected with Ethereum after the update.
Remember, this info can get outdated, so always look for the latest updates. Also, the software used by validators, who help keep Ethereum secure, has been updated for this new change.
Layer 2 (L2) transactions can be stored in 2 ways
Transactions on Ethereum’s Layer 2 can now be stored in two ways:
in new, cheaper temporary blob space or
in the older, more costly permanent smart contract calldata.
Blob space saves money by offering short-term storage, enough for all needed security checks. The permanent calldata, though more secure for long-term, costs more.
The choice between using blob space or calldata is usually up to the rollup providers, who decide based on how much blob space is available.
If lots of people want to use blob space, they might have to use calldata to make sure transactions go through quickly.
Even though users might technically pick which storage they prefer, rollup providers typically make this decision to keep things simpler and costs lower. For more details on how this works, you should look at the information given by the rollup providers.
Enhanced security with EIP-4788 and EIP-6780
The Dencun upgrade wasn’t mainly about security, but it did bring in some improvements to make Ethereum safer.
Part of the update, EIP-4788, helps the parts of Ethereum that check transactions and the parts that carry out transactions talk to each other better. This could make it harder for attackers to find and exploit weak spots.
Another change, EIP-6780, is about altering the way smart contracts can end themselves through the “SELFDESTRUCT” function. By tweaking how this works, it’s harder for bad actors to misuse this function, which could lead to better overall security for Ethereum smart contracts.
Lower costs on Layer-2 solutions
The Dencun update has introduced a new method for Ethereum’s Layer-2 scaling solutions that lowers the cost of transactions.
These Layer-2 networks group many transactions together to save money before sending them to the main Ethereum network.
The key feature of Dencun, called proto-danksharding and introduced in EIP-4844, reduces Layer-2 costs by allowing these networks to store certain transaction information outside the main blockchain.
Will the 4844 update lower the cost of gas on Layer 1 (L1)?
Not really.
The update brings in a new way to charge for something called blob space, used mainly by rollup providers. Moving rollup data to blobs might lower fees on L1 a bit, but the main goal is to cut costs on Layer 2 (L2). Any decrease in L1 fees would be a small, indirect result.
The lessening of L1 gas costs depends on how much the rollup providers use the new blob data. But since L1 is used for lots of other things too, its costs might stay competitive.
If rollups start using blob space, they will use less L1 gas, which could help reduce L1 gas prices for a while.
However, blob space has its limits; if it gets too full, rollups will need to use the old, more expensive storage, which could make gas prices go up again for both L1 and L2.
How do you get old blob data?
Regular Ethereum nodes keep the latest network information, but they can throw away old blob data after about 18 days. Before getting rid of it, Ethereum makes sure everyone who might need it has a chance to:
Grab and save the data if they want.
Finish any dispute periods for rollups.
Complete the transactions for rollups.
People might want old blob data for different reasons, and there are a few ways to get it:
The Graph uses a network of node operators paid in cryptocurrency to keep this data.
BitTorrent lets volunteers store and share the data.
Ethereum’s portal network is working to let people access all Ethereum data through a network similar to BitTorrent.
Individuals can also keep their own copies of any data they find important.
Rollup services might keep the data to make their services better.
Block explorers use special nodes to collect and keep all this information, making it easy to look up past data on the web.
When getting old data back, you just need one reliable source to check it against the current network state.
How does this upgrade fit into the larger plan for Ethereum?
Proto-Danksharding is a preparatory step towards fully adopting Danksharding.
Danksharding aims to spread out the storage of transaction data among different network participants, so no single one has to store everything.
This method will allow more data to be included in each block, helping Ethereum grow to support more users and transactions.
Such growth is key for Ethereum to serve billions of people affordably and run more complex applications while keeping the network spread out and not controlled by just a few.
Without these updates, the equipment needed to run the network would become too costly, possibly leaving only a few large players in charge, which would conflict with Ethereum’s goal of being decentralized.
