September was a tough month for crypto investors, especially those who made big bets on ether, tokens attached to the Ethereum blockchain.
Ether fell 13% for the month, the second-largest monthly fall of last year, trailing just 16% in June. Bitcoin fell 7% in September.
It is difficult to associate short-term price movements with a specific event, and with the historic gathering in crypto over the past 12 months, recall will be expected. Ethereum, the second most valuable cryptocurrency behind Bitcoin, still rose about 830% last year.
Investors are now buying September Deep. On Friday, the first day of October, both Ether and Bitcoin rose above 9%.
Ether 12 month price list
But the September roller-coaster reflects a particularly rocky stretch for the etherium ecosystem, which has caused concern for investors and developers.
Network speeds and high transaction fees tend to be a problem. The upgrade to “London” in August was supposed to make transaction fees less volatile, but had limited effects.
Meanwhile, Rival blockchains called “Ethereum Killers” are taking advantage of the Ethereum challenge.
Ethereum also unexpectedly split into two separate chains in late August, when someone uses a bug in the software that most people use to connect to the blockchain. This led to an attack on the network, and not for the first time.
“All of these factors can have some effect on speculation, no doubt,” said Matty Greenspan, founder and CEO of Quantum Economics, in an interview. “But don’t forget that Ethereum has been pretty good so far this year and the whole market seems to be coming together at this point. So I won’t try to read too deeply into these short-term movements.”
Nevertheless, Etherium, which serves as the primary building block for all types of crypto projects, such as non-fungible tokens (NFT), smart contracts and decentralized finance (DFI), can overcome some major obstacles to resist emerging competition.
Unexpected splitting of etherium
A central basis for Ethereum’s security stems from the existence of only one virtual book, which means you can’t create coins from thin air. That ledger has to work, because the decentralized nature of the blockchain means there are no rule-keepers or banks sitting in the middle of the transaction to act as accountants.
Etherium developers were rightly alarmed in August when the chain split due to a bug.
“This fork temporarily created two separate records of transactions on the Ethereum network – like a parallel book.” Matt Hogan, chief investment officer at Bitwise Asset Management, who created the first cryptocurrency index fund.
For a while, it wasn’t clear that the split would lead to a “double spending attack,” where the same token could be spent more than once and the transaction could be reversed, Hugan said. Smart contracts that manage billions of dollars of assets could also be at risk. Smart contracts allow people to create applications on top of Ethereum with the help of self-executing code, eliminating the need for third parties to manage transactions.
Such an attack would be difficult to execute, as it was clear which nodes were on the right side of the division and which were not. “But in theory, there was a risk,” Hugan said.
The good news for Mine and Exchange is that most of them have upgraded their software as recommended and the problem has been resolved relatively quickly, said Tim Beiko, coordinator of Ethereum’s protocol developers.
Aston Bunsen, co-founder of QuickNode, which provides blockchain infrastructure to developers and companies, said it was a “responsibly revealed weakness”.
“It’s a reminder that blockchain in general and Ethereum in particular are new and disruptive technologies,” Hugan said. “They can do amazing things – অর্থ 1 billion a minute in transactions and money for programs like software – but they’re not quite mature.”
Bugs keep happening
The long-term problem with etherium is that such random errors occur.
In April, the Ethereum blockchain was hit with a bug in the software program used to access it. And in November, many of Etherium’s DFI apps were temporarily shut down after the defeat of Geth Upgrade, causing the chain to split in two.
Geth is short for Go Ethereum. In order to access the Ethereum blockchain, operators and miners have to pick their software. Mostly uses Geth, which 64% of the network accounts.
It happened a few weeks ago when the Ethereum blockchain broke in half There was a bug in Geth’s sensory system. This creates a single source of truth for the transaction so that everyone can see the same thing regardless of what software they are using.
The developers discovered the bug, released a new one with a correction, and publicly asked everyone to update. Many users have upgraded, but others have not. When an unknown actor exploits a bug, Etherium forks, which means it’s divided into two separate chains: one for people who have updated their software and the other for those who haven’t.
Nick Carter, co-founder of blockchain data aggregator Coinmetrics, said Ethereum “wanted a decentralization vet by having too many clients, but that resulted in their inconsistencies.”
When software programs do not talk to each other, it creates problems for the network.
Bitcoin takes a very different approach. It relies on a highly secure software program for nodes to enter the blockchain. Bitcoin developers have long tried to avoid hard forks at all costs, so there is a tendency for users to choose rather than push all changes to the original software, According to Carter.
“Ethereum prioritizes rapid development, but it comes at the cost of a more fragile set of software implementations,” Carter said.
Some crypto experts have attributed Ethereum’s success to the convenience of its first operator. According to the website State of the Daps, most NFT and 78% DFI apps or D apps run on Etherium.
This is beginning to change, thanks to the growing popularity of rival blockchains.
Even before this latest blockchain split, users were complaining about Ethereum’s heavy traffic congestion and high transaction fees, which touched a record $ 70 earlier this year, and just this week, returned from $ 20 to $ 46 and $ 32..
At current prices, fees drive some users away.
They are leaning towards blockchains like Cardano, dApps creation platform and Solana, whose domestic currency has grown by almost 800% since September 2020. Launched last year, Solana is gaining traction in the NFT and DeFi ecosystems because it is cheaper and faster. Used more than etherium.
Solana Process 50,000 transactions per second, And the average cost per transaction is $ 0.00025, according to its website. Etherium can handle about 13 transactions per second and the transaction fee is significantly more expensive than Solana.
Institutional money is flowing. Solana has stopped selling private tokens for just 314 million, led by Andresen Horowitz and Polychain Capital.
Mark Pekin, chief executive of Bespoke Growth Partners, said investors who focused primarily on Ethereum “are diversifying their achievements into other cryptocurrencies, fueling alternative blockchains such as Algorand, Solana and Cardano.”
Bunsen told CNBC that while Solana is making good progress in becoming a usable blockchain, it has not been decentralized enough to satisfy the larger crypto community.
It is also not immune from bugs. Last month, Solana suffered a 17-hour confusion after a service was denied, which led to a flood of transactions due to bots.
The list of so-called Ethereum killers is long, and includes blockchains like matic and polygons, which complement Ethereum, according to Bunsen, Cardano, which is known for its safety.
“I think some killer of etherium will make it,” Bunsen said. “But they won’t kill Ethereum.”
Ethereum works has its own upgrades. For several years, it has been building Ethereum 2.0, which is expected to be ready in the first quarter of 2022.
The change will move Etherium to a less energy-intensive mining process and, According to Vitalik Butarin, founder of the network, Can speed up 100,000 transactions by more than 7,000 times per second.
If successful, Bunsen said, Ethereum 2.0 would be “a throughput to the Ethereum network and a huge win for the environment in general.”
Clock: Ethereum upgrade here means for Ether and Minors