Goldman joins chorus of ether bulls ahead of August update
It believes ether will replace bitcoin as a store of value
Ether, the native unit of the Ethereum network, is on the lips of all participants in the cryptocurrency market. This week a date has been set for its long-awaited London update, an improvement of five aspects of the current algorithm of the blockchain on which smart contracts are developed and on which the majority of companies in the DeFi ecosystem are built (from English decentralized finance). Known in the jargon of the market as a hard fork, it will take place on August 4, somewhat later than planned, but in a more secure way, having reaped successes in its two tests carried out.
These changes in the Ethereum protocol are the prelude to version 2.0 of the second 'crypto' by market capitalization, which will arrive towards the end of the year, a long-awaited revolution due to the fundamental change involved in mining - the way to obtain the tokens- of the ether. All these reasons mean that more and more analysts and market participants are very bullish with this token, which currently has a capitalization of $253bn, about 19% of the total market for crypto assets, compared to bitcoin, which maintains a 44% dominance.
But all of this could change very soon, according to Goldman Sachs, which has joined the chorus of experts and analysts who see far greater potential than any other digital currency in Vitalik Buterin's creation, even above bitcoin. According to a recent opinion note, the US investment bank believes that 'crypto' "has what it takes to unseat bitcoin as the dominant store of value."
The entity believes that ether use cases currently have the greatest "potential", being the most popular development platform for smart contracts. The report, however, although it was bullish on ether, denies the superiority of cryptocurrencies over gold when it comes to occupying the first place among safe-haven assets.
"Gold competes with cryptocurrencies to the same extent that it competes with other risk assets such as equities and cyclical commodities," the note reads. "We see gold as a defensive inflation hedge and 'crypto' as an inflation risk hedge."
Goldman also notes that competition among cryptocurrencies represents another risk factor preventing the nascent asset class from being a safe place to park investments.
THE HARD FORK
Precisely, in order to be number one in the market, both bitcoin and ethereum will face improvement processes in the coming months. As already mentioned, the most immediate is scheduled for the beginning of August for Ethereum and consists of five Ethereum Enhancement Proposals (EIP), among which EIP 1559 and EIP 3554 stand out, whose objective is to counteract various inefficiencies:
EIP 1559 introduces a new fee structure to make Ethereum less expensive. This change in the protocol is very controversial because it aims to burn part of the tariffs and, therefore, reduce the income of the miners.
The EIP 3554 delays the Ethereum difficulty bomb until December 1. This mechanism will increase the difficulty of mining on the Ethereum network, effectively "freezing" the proof-of-work (POW) in preparation for Ethereum's move to version 2.0, which involves the proof-of-stake ( POS for its acronym in English), less polluting.
Meanwhile, bitcoin will maintain the POW protocol, which mining is much more polluting and remains in the eye of the hurricane due to the carbon footprint it leaves. However, it will also roll out a series of enhancements in November, under the codename 'Taproot'.
Translated by Caoimhe Toman.