There Are 17% More Ethereum Addresses Than At The Start of 2021. Here’s Why Crypto Investors Should Care

In this edition, we are going to dive deeper into why there are 17% more Ethereum addresses today than there were at the start of this calendar year and why there are now more daily active ETH addresses than Bitcoin addresses for the first time ever.

Why should you care? More addresses equal more transactions and more transactions equal increased value.

Of course, that’s an overly simplified way of looking at things, especially when you consider that the price of one Ethereum token is down nearly 49% from its all-time high of $5,264.55 just two months ago.

More crypto investors are gaining confidence in the long-term future of Ethereum based on the upgrade coming up at the beginning of 2022 and a handful of other factors that are causing people to buy the dip.

A 17% increase in addresses represents 8.16 million new addresses. Of course, we can’t assume that each of those addresses represents a new person becoming interested in Ethereum, but there have to be at least a few newbies taking an interest, and that’s always a good thing.

So, in this post, let’s break down the four key reasons this is all happening.

Reason #1: The Ethereum 2.0 Upgrade

You might already know this. The Ethereum 2.0 upgrade is happening next year. Ethereum 1.0 will still be running in parallel with 2.0, but 2.0 will introduce the concept of sharding and a proof-of-stake consensus algorithm to the world’s second most valuable blockchain by market capitalization.

Sharding allows for transactions to be confirmed outside of the blockchain in layers. This will improve scalability and transaction fees. It’s been a long-awaited upgrade. Once it’s complete, the price of an Ethereum token will almost undoubtedly increase in value.

Sharding effectively opens up the door to separate chains that can validate transactions. The final result appears on the main blockchain, called the Beacon Chain.

Ethereum won’t be the first blockchain to introduce a Beacon Chain. Ethereum cofounder Gavin Wood is now working on another popular smart contract platform, Polkadot, which uses a Beacon Chain to register transactions.

The thing about Ethereum is its brand recognition among crypto investors is pretty high. It will be interesting to see whether there will be a heated competition between Ethereum and Polkadot (among other smart contract platforms), or whether the 2.0 upgrade will be enough to keep investors within the Ethereum ecosystem long-term.

Reason #2 The Addition of EIP-1559 

A string of five changes to Ethereum’s coding structure is set to go live on the project’s mainnet sometime this month. These changes are going to turn Ethereum into a deflationary asset instead of an inflationary one.

This means that a small amount of Ethereum tokens will now be burned every time a user pays gas fees, making the remaining tokens more valuable.

EIP stands for Ethereum Improvement Proposals. Proposal 1559 will change the behaviour of miners and transaction pools and will take Ethereum to the next level as far as fundamental value is concerned.

CoinDesk recently released a research report called The Investment Implications of EIP-1559. The report outlines the purpose of the EIP-1559, how it will be implemented on the blockchain, and what it will do for you, the crypto investor.

The whole report is 24 pages and it’s definitely a recommended read, but just to save you some time, the key points are outlined below.

What EIP-1559 Entails

The Ethereum Virtual Machine (EVM) is the engine that drives the Ethereum network. Therefore, the cost of gas fees is automatically calculated by the EVM. That’s why you can open up a MetaMask wallet and get an estimation of how much it will cost you to put an Ethereum transaction through both at a slow speed, the average speed, and the fastest speed possible.

Even though the EVM sets the gas fee, it’s up to you, the user, to decide how much you want to pay and how long you want to wait for your transaction to go through. The higher the gas fee you choose, the more likely you are for your transaction to go through before other users. 

It’s essentially putting users at the mercy of an auction-style bidding war, which drives the cost of fees higher whenever the network is busy.

EIP-1559 will replace this auction-style bidding scheme with a commonly known gas rate that everyone is aware of. It essentially introduces a base fee (based on a dynamic rate of conversion from gas to gwei. The base fee moves up and down depending on how busy the blockchain is at any given moment.

This doesn’t mean that gas fees will necessarily be cheaper. It just means they will more accurately reflect market conditions.

Four Things EIP-1559 Will Introduce to Ethereum

EIP-1559 burns Ethereum tokens every time a transaction is processed. Although many crypto investors debate whether Bitcoin or Ethereum is a better investment, the truth is other than their market capitalizations, the two projects are very different. 

Bitcoin has a limited coin supply of 21 million coins. Ethereum’s coin supply is theoretically unlimited. That means burning gas fees acts as a counterbalance to more Ethereum tokens entering circulation.

EIP-1559 also prevents economic abstraction. At the moment, Ethereum miners don’t have to accept Ethereum as their reward. Users can pay their transaction fees in any coin that is ERC-friendly. With EIP-1559, fees have to be paid with Ethereum, which guarantees a lot of the circulating supply will be burned regularly.

The upgrade also decreases the volatility of transaction fees because you will no longer be able to set how much you’re willing to pay. Instead, fees can only increase or decrease by 1.125x each block. That means Ethereum fees will offer more predictability.

This brings us to the fourth point. With EIP-1559, the Ethereum transaction fees will be more efficient for two reasons. 

First, it introduces variable block sizes, which means more transactions can fit into a block when it’s required. Second, it provides more accurate estimations of what the fees are at any given time.

Layer 2 Solutions Will Lower Ethereum Fees

Polygon, Arbitrum, and optimism are a trio of sidechain solutions, otherwise known as Layer 2 solutions that ultimately aim to lower Ethereum gas fees. A Layer 2 solution is effectively a sidechain that users can take advantage of to pay lower fees.

Again, this will ultimately drive up the fundamental value of the Ethereum blockchain and it will encourage users to transact more frequently, which should leave more capital for investment into interesting projects like NFTs, Metaverses, and various DeFi protocols.

Thanks to Polygon, Ethereum fees have dropped significantly over the last several months. Naturally, we can’t give all of the credit to Polygon, not only because there are two other protocols doing the same thing, but because the activity taking place on the blockchain is happening at a significantly lower volume right now as the market capitalization of the whole cryptocurrency market continues to slide.

Institutional investors Are Choosing Ethereum Over Bitcoin

Billionaire investor Carl Icahn sees more potential in Ethereum than Bitcoin just because Ethereum has so many more use cases thanks to its commitment to becoming the world’s most powerful decentralized computer and the fact that it gives developers the ability to create an infinite number of decentralized applications and raise money for those applications in a way that they never could before.

Icahn isn’t the only one that believes that. Many institutional investors and major banks are buying into Ethereum, including Goldman Sachs and J.P. Morgan.

The bottom line is, Bitcoin functions as a peer-to-peer network allowing users to make payments to one another in a trustless environment. Ethereum allows users to make payments, but it’s also the leading blockchain for building out new projects in other asset classes as mentioned above.

The thing you have to keep in mind is that the two projects are not the same. It’s also important to remember that although crypto prices might be dipping right now, Ethereum is looking fundamentally strong in terms of hitting its future development benchmarks in both the short term and the long term.

With all of this momentum building, it’s no wonder that there 8.16 million new Ethereum addresses registered since the start of this year.

Buy Ethereum With Netcoins

Buying Ethereum with Netcoins is easy. All you have to do is register for a free account, choose whether you want to deposit via e-transfers, online billing, or other cryptocurrencies and you’re on your way.

Netcoins allows users to pay next to nothing in fees for their transactions, meaning that you get the best market price possible for your Ethereum at any given moment.

Given that the price of Ethereum is down almost 49% from just two months ago, nobody can tell you when the right time to invest is, but at least now you know about the positive catalysts coming to the Ethereum blockchain over the next 6 to 12 months.

Thanks for reading this edition of Netcoins Progressive investor.