Ethereum (ETH) outshined bitcoin on Thursday with a 4% rally, bringing the world’s second-largest cryptocurrency above US$2,000 for the first time in eight months.
It follows yesterday’s major Shanghai upgrade, which made over US$30bn of staked ETH coins available for redemption.
Ether’s ongoing rally contrasts sharply with market fears that stakers, some of who have waited three years to access their coins, were with going to take profits or capitulate their losses.
The ETH/USDT pair went as high as US$2,008 before inching back below 2k while still remaining 7.5% higher since the start of the week.
Bitcoin, in contrast, added 1.6% in today’s session and 7.3% since the start of the week. Short-ETH futures have been liquidated to the tune of US$28mnln as a result.
The rally could be taken as a vindication of the utility of ETH, which is used to pay transaction fees on the world’s largest smart contract ecosystem, or as a sign that stakers are waiting for their coins to become profitable before selling off.
With the Shanghai upgrade complete, ETH holders are now able to stake their supply to the network to provide transaction security under the proof-of-stake (PoS) consensus method, earning yield in return.
A minimum of 32 ETH (US$64,000) is required to become a staker, but protocols such as Lido DAO (LDO) allow anyone to join a staking pool and share the rewards.
Lido DAO currently has over US$12bn in total volume locked (TVL), comprising nearly a third of all staked ether tokens.
Approximately 15% of all ETH coins in circulation are currently being staked, with over 562,000 individual stakers taking part.
ETH validator count over 30 days – Source: stakingrewards.com
Ethereum’s PoS consensus protocol differs from bitcoin’s proof-of-work (PoW) model that was pioneered by bitcoins anonymous creators. Under PoW, high-prowered computers ‘mine’ for bitcoin by solving complex equations, earning bitcoins as a reward.
PoS is up to 99% more energy efficient and makes for a significantly faster blockchain network, than PoW.
However, PoS is often criticised for being too centralised, at odds with the decentralised philosophy underpinning cryptocurrency technology.