Bitcoin is the only asset in the world that has a fixed amount of supply. Even the supply is limited or limited, which is only 21 million BTC (Bitcoin units).
While Ethereum has a weakness with a very large and unlimited supply. So that many people are more interested in owning Bitcoin.
However, in 2016, Vitalik Buterin, who is none other than the “Creator” of Ethereum, stated that there would only be a supply of 120 million ETH in circulation. For the record, there are currently 114.4 million ETH circulating worldwide.
Ethereum 2.0 Upgrade
In this article, we will discuss Ethereum 2.0’s evolution regarding supply reduction. Previously, for those of you who don’t know what Ethereum 2.0 is, you can read the article here.
Ethereum will evolve or upgrade to Ethereum 2.0. The launch of phase 0 has started in December 2020. Then, phase 1 and phase 2 or the last stage will take place one year after that.
Ethereum converts a proof of work (PoW) consensus scheme to a proof of stake (PoS). Initially, Ethereum implemented a PoW or mining scheme. Then change the schematic to PoS or guarantee.
So, initially Ethereum was mined by miners, Ethereum 2.0 was obtained by staking or pledging Ethereum. The person staking is called a validator.
The highly anticipated Ethereum 2.0 launch took place on 01 December 2020. A deposit contract requires a minimum of 524,288 ETH to lock. Therefore, ETH 2.0 is already active and is working to shift to a proof-of-stake consensus mechanism from the current proof of work.
The total value at stake for deposit contracts continues to grow day by day as it currently stands at 2.29 million ETH. This means that around 2.5% of the ETH supply is locked out of a total of 114.4 million ETH.
This was the factor that led to the soaring Ethereum price, and open interest soared.
How The Impact to Price?
The launch of Ethereum 2.0 phase 1 has doubled the price of Ethereum in the month following. In fact, Ethereum is again past its highest price in history (all time high / ATH) past IDR 20 million.
Naturally, the increase occurred because 2.5% of ETH from all ETH circulating in the world had been successfully locked. In phase 0 launch, each validator can lock to a minimum of 32 ETH and its multiples.
Doesn’t Staking Make a Loss?
Why are validators willing to lock or guarantee Ethereum? Isn’t it a disadvantage to melt Ethereum assets?
Staking is actually almost the same as melting or destroying. Only here the language is more appropriate to guarantee. Why is that? How do assets that are intentionally lost increase prices?
Here’s an analogy.
Within crypto assets, particularly Bitcoin and Ethereum, supply and demand is a major factor. This means that supply and demand are the factors that most influence the rise and fall of prices.
The more demand and the less supply, the price will go up. If an asset has a lot of demand and a large supply, then the asset will stagnate. Meanwhile, if the demand is low but the troops are many, the asset’s price will fall.
Then, the weakness of Ethereum is the unlimited or unlimited supply so far. From the very beginning, Ethereum claimed that Ethereum was Bitcoin 2.0. However, people’s concern is an unlimited supply.
So Ethereum limits its limit by staking by the validator.
So, it’s okay, for the validator to guarantee or bet or other languages ??destroy at least 32 ETH, because in the future, the remaining ETH will be more expensive.
A Validator Calculation
A validator who stakes Ethereum will not suffer a loss, as long as he owns the remaining Ethereum.
An example of a calculation could be like this. If a validator has 100 ETH, assuming the value of Ethereum during phase 0 is IDR 8 million. So, the total assets are IDR 800 million.
He wants to stake by guaranteeing, as much as 32 ETH at launch phase 0.
Total staking value 32 ETH x IDR 8,000,0000 = IDR 256,000,000
Total assets (100-32) = 68 ETH x IDR 8,000,000 = IDR 544,000,000.
After staking, he only has 68 ETH or IDR544 million, assuming 1 ETH 8 million. In fact, initially he had total assets of Rp. 800 million.
However, one month later, after the launch of phase 0, the Ethereum price had increased to IDR 20 million per ETH.
So, the validator’s total assets are:
68 ETH x IDR 20,000,000 = IDR 1,360,000,000.
So, initially he only had assets of Rp. 800 million. After staking and after one month, the total assets became Rp1.36 billion.
Ethereum Price Will Increase Again
This year, the Ethereum 2.0 phase 1 launch will take place. More Ethereum supplies will be locked in. One validator is required to stake with a minimum of 64 ETH and its multiples.
The supply of Ethereum will continue to decrease and the demand will continue to grow. So, the price of Ethereum will continue to increase.