Original Title: "Why is 2024 a critical period in the development history of Ethereum?"

Original Source: Ebunker Chinese

On-chain activity increases, deflationary trend strengthens

After the completion of the merger, ETH has a deflationary characteristic during periods of high network usage. Since the merger in September 2022, the supply of ETH has decreased by 369,814 coins, which accounts for 0.21% of the total supply. Ethereum stakers have received rewards exceeding 1.06 million coins, but the destruction mechanism has permanently destroyed over 1.43 million ETH during the same period.

Recently, thanks to the bullish trend in the cryptocurrency market, the trading volume of decentralized exchanges (DEX) has increased, NFT sales have increased, and L2 network activity has also become significantly active. In the past two weeks, over 21,000 ETH have been burned, worth $62.8 million.

Defi Llama data shows that the trading volume of DEX exceeded $5 billion on February 19, an increase of 134% compared to February 4. According to Dune Analytics, NFT sales on February 19 rose to $33 million, an increase of 114% compared to February 2. L2BEAT data shows that on February 18, all L2 blockchains processed over 92.4 transactions per second on average, setting the second-highest record in history.

It is worth noting that the launch of the ERC-404 token standard in early February was also one of the reasons for the increase in gas fees. ERC-404 allows multiple wallets to simultaneously own the ownership of a single NFT, fragmenting the ownership of NFTs. ERC-404 uses ERC-20 and ERC-721 tokens, facilitating the fragmentation of NFTs, resulting in gas-intensive transactions. With the increasing activity in the cryptocurrency market and on-chain activity, the deflationary trend of Ethereum is expected to further strengthen in the coming months.

Ethereum network is about to undergo a significant upgrade

The next important update (EIP-4844) for the Ethereum network will be executed in March this year, aiming to improve the efficiency, scalability, and security of the Ethereum blockchain. This update will reduce the cost of building L2 ecosystems around Ethereum by 10 times, which will significantly increase the adoption of Ethereum and L2.

The upgrade of Dencun marks the beginning of the "the Surge" era in the Ethereum roadmap, becoming a major turning point in this cycle. Ethereum needs to use L2 for expansion, and L2's sub-chains and professional business development teams are also pushing for rapid growth of L2. In addition, the integration of Verkle trees on the Ethereum blockchain is highly anticipated, and it is expected to reduce disk space requirements, enhance the functionality of staking nodes, and improve the overall user experience.

Approval of Ethereum ETF Expected for Spot Trading

On February 17th, VanEck submitted a revised S-1A filing for its Ethereum ETF. ARK/21Shares also submitted a new 19b-4 filing and a series of new analytical explanations for its Ethereum ETF. Previously, BlackRock, Fidelity, Grayscale, Invesco, Galaxy, and Hashdex have all submitted relevant applications. Dave LaValle, head of Grayscale ETF, stated that there is a 50% chance that the SEC will approve the conversion of its Ethereum Trust to a spot ETF in May of this year.

American investment bank Bernstein discussed Ethereum's prospects in the coming months in a research report on February 19th, focusing on staking rewards, potential institutional inflows, and the approval of spot ETFs. The report believes that Ethereum is ready to be adopted by mainstream institutions due to its staking incentives, environmentally friendly design, and institutional practicality in establishing new financial markets. According to the report, Ethereum may become the cryptocurrency that receives spot ETF approval after Bitcoin, with a 50% chance of approval for Ethereum spot ETFs in May of this year, and the probability approaching 100% by the end of this year.

Web3 project development enters a new stage

Unlike Bitcoin, Ethereum is not just an asset, its intrinsic value is highly related to the functionality of its blockchain. Ethereum is more in line with the goal of a shared and programmable database or DApp development platform. Therefore, in order for the Ethereum network to have value, there must be valuable applications on its network.

Currently, some programs have emerged from the development of Web3, but the majority of applications will come from traditional companies adjusting their systems and integrating with blockchain. Looking at the non-native mainstream Web3 killer applications that exist on the chain, there are few project parties who seriously maintain their on-chain applications after the last bull market cycle.

During the previous cycle, due to the widespread and unknown nature of blockchain, most participants in the blockchain industry, including blockchain teams themselves or other Web3 company development teams, lacked sufficient guidance. Additionally, they had to compete for development space with meme tokens and NFT speculation, making certain technical operations unfeasible.

And the business development of the team is usually segmented by region, which requires these teams to cater to dozens of different fields, each department has different needs and complex applications. The end result is quantity over quality, making most projects unsuccessful.

However, in 2024, the rules of the game will change. In terms of how to build on the chain, the blockchain ecosystem is entering a period of specialization. The largest L2 blockchain currently is subdividing specific configurations, as well as specialized teams and structures.

Blockchain Development Kit

Take Polygon as an example, it does not configure a universal blockchain and a regional business development team for all applications, but uses multiple sub-chains suitable for specific scenarios. Polygon is providing a blockchain development kit (CDK) for the market to build sub-chains on it, and all liquidity is connected through an aggregation layer.

Currently, Polygon has announced the adoption of sub-chains including:

· B2 (a blockchain CDK focused on building rollups for Bitcoin);

· OEV Network (aiming to capture the extractable value of oracles, OEV, on the CDK blockchain);

· Hypr (a blockchain focused on CDK for gaming);

· Libre (a CDK blockchain dedicated to facilitating the issuance of tokenized assets for institutions);

· FireDrops (a CDK blockchain designed for loyalty behavior of Flipkart, the largest e-commerce platform in India).

In addition, other mainstream L2 blockchains are also following the same path. For example, similar to Polygon's CDK, Optimism has its "OP-Stack". A paradigm shift is underway, and many professional sub-chains and business development teams of almost all mainstream L2 blockchains will compete in the same field.

Thanks to Ethereum's L2 plan, building a secure chain has become very easy. Therefore, 2024 may become the year when killer Web2 applications appear in Web3, and many companies and users will try to incorporate blockchain into their daily lives.

Summary

2024 will be a key period in the development history of the Ethereum blockchain, marking a new development cycle since the merger in 2022. The increase in on-chain activity is driving the deflationary trend of Ethereum. The Dencun upgrade will improve the efficiency, scalability, and security of the Ethereum blockchain. The expected approval of Ethereum spot ETF will continue to drive institutional adoption. The blockchain development kit (CDK) is creating more possibilities for developers on the Ethereum network, and more valuable applications will continue to drive the prosperity of the Ethereum network.

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