The end of 2020 has been huge for the crypto community. Not only was there a spectacular price surge across digital assets, possibly signaling the beginning of another bull market, but there was also the launch of Ethereum 2.0 beacon chain, which has been in development for some time.
The long-awaited update to the Ethereum blockchain transforms the network from a proof-of-work to a proof-of-stake consensus model and is intended to improve speed, security, lower transaction fees and fix the scalability issues that have been holding Ethereum back throughout 2020.
Ethereum 2.0 is still in the very early stages of development – in phase 0, and there is still a very long way to go until a complete transfer from the old chain to the new one occurs. Despite this, its impact on the market has already been felt due to its fast paced development. This is true especially in the DeFi space as Dr. Octavius, co-founder of the OctoFi DeFi protocol told Cointelegraph:
“Most people misunderstand Eth2 and what it means for the industry as a whole, especially DeFi. While other chains are competing to solve some scaling issues on Ethereum, I think the network effects are quite profound and Ethereum is leaps and bounds above the others. If anything, the onset of 2.0 gives people confidence in Ethereum’s staying power.”
The launch of Ethereum 2.0 caused significant price volatility. The price peaked at around $670 right after the launch on December 1, only to suffer a slight correction over the following days, in tune with the rest of the altcoins. But the hype was most felt in DeFi, as ETH 2.0 was a crucial element driving the growth of total value locked in the projects and, according to Octavius, this trend is likely to continue: “The effects are likely going to accelerate participation in DeFi markets as the DeFi builders will be able to improve their products by an order of magnitude.”
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