Category: Ethereum

Ethereum’s performance this year has fallen behind Bitcoin’s, with the arrival of Bitcoin spot ETFs making all the difference.

What’s Going On: Bitcoin surged past its all-time high last month, driven by the high demand for new investment products tracking its spot price. Year-to-date, Bitcoin has increased by 47%.

However, Ethereum hasn’t followed the same pattern. Unlike Bitcoin, Ethereum hasn’t come close to its 2021 peak this year. Its year-to-date gains have been modest, sitting at 32%.

According to on-chain analytics firm Glassnode, Bitcoin’s Short-Term Holders’ Realised cap nearly matched the peak of the last bull run. In contrast, Ethereum’s STH-Realised Cap is less than half of the previous cycle’s level.

In simple terms, newer market participants have shown much more interest in Bitcoin than in Ethereum, where new capital inflows have been relatively weak.

Why It Matters: The introduction of new Bitcoin spot ETFs has made cryptocurrency investing more accessible, attracting more participants to the market, Glassnode explained.

However, Ethereum is still awaiting a decision on its spot ETFs, which is expected later this month. British multinational bank Standard Chartered, which initially forecasted approval by May, reversed its stance last month. Bloomberg ETF analyst Eric Balchunas also made a pessimistic statement regarding this matter.

Ethereum’s status has become a significant concern, with reports suggesting that the SEC is covertly assessing whether Ethereum should be classified as a security.

Potential Impact: If Ethereum is declared a security, it could negatively affect sentiment and investment in the coin, potentially leading to a price crash.

Price Movement: At the time of writing, Ethereum was trading at $3,015.99, marking a 1.56% drop in the last 24 hours.

The Ethereum community is divided over EIP-3074, a code change to enhance user experience with blockchain wallets.

As blockchain developers aim for mainstream adoption, improving the usability of crypto wallets has become a top priority.

Ethereum developers are progressing with their discussions and including specific Ethereum Improvement Proposals (EIPs) for the blockchain’s upcoming major hard fork, Pectra.

One of these proposals, EIP-3074, has garnered support and concern within the Ethereum community. This code change is intended to enhance user experience with blockchain wallets.

Previously, Ethereum developers addressed issues to simplify the wallet user experience and deployed features unlocking new capabilities. They are striving to make the experience even more user-friendly and permanently embedded in the blockchain.

EIP-3074 is designed to make a specific type of wallet, known as externally owned accounts (EOAs), more programmable by authorising smart contracts.

Ethereum has two wallet accounts: EOAs, such as MetaMask and Coinbase wallet, and smart contract wallets like Argent and Safe.

EOA account users have a public and private key pair. However, if the private key to an EOA account is lost, no help desk or key recovery process is available to regain access to the funds.

Previous proposals, like ERC-4337, aimed to make EOAs easier to use, introducing the concept of account abstraction (AA) and allowing users to recover their crypto with smart contract features.

EIP-3074 represents another innovation in this realm, allowing transaction capabilities to be delegated to smart contracts. The proposal enables users to batch transactions together and sign off once. Additionally, it allows third parties to sponsor users’ transaction fees, covering gas costs for their users.

EIP-3074 also permits users to sign transactions submitted by a different party, such as signing transactions from a different interface or signing them offline.

However, while many community members support the proposal, others have raised concerns, particularly regarding the security implications of the batched transactions feature.

Lukas Schor, co-founder at Safe, has expressed concerns about the proposal’s lack of a clear pathway to full account abstraction and its potential negative impact on AA adoption.

Itamar Lesuisse, co-founder of Argent wallet, has raised security concerns, highlighting the risk of allowing scammers to drain entire wallets with a single off-chain signature.

For security reasons, experts called for wallets to ban EIP-3074 MAGIC signatures on a per-wallet basis.

While Ethereum’s (ETH) price struggles to match Bitcoin’s 2024 gains, analysts suggest that the cryptocurrency market remains on an upward trajectory.

Ethereum continues to underperform Bitcoin. Despite Bitcoin’s gains, Ethereum lags, leading to a weaker ETH/BTC ratio. According to Glassnode, the ratio reached its lowest point since April 2021, hitting $0.04622 on May 1.

Glassnode explains that Ethereum’s underperformance is due to a lag in speculative interest among short-term holders (STH). This cohort comprises investors who acquired their coins within the last 155 days and reflects new investor demand.

While Bitcoin experienced a surge in speculative activity leading up to its all-time high in March, Ethereum has yet to match this trend, as it has not reached its previous all-time high.

The lack of new capital inflows reflects Ethereum’s underperformance relative to Bitcoin. Glassnode’s on-chain data reveals that while Bitcoin’s STH-Realised Cap is almost at the same level as the last bull run peak, Ethereum’s STH-Realised Cap is less than half of the previous cycle levels, indicating a lack of new capital inflow.

The market is still in the early stages of an uptrend. While Ethereum’s performance has historically been closely linked to Bitcoin’s, the recent price action suggests this trend continues.

Both Bitcoin and Ethereum experienced a sell-off after the fourth halving. However, Bitcoin has steadily recovered, consolidating within a specific price range.

As measured from its all-time high, Bitcoin has experienced a deeper correction than Ethereum.

Despite recent challenges, Bitcoin and Ethereum still have a relatively low Realised Cap associated with Long-Term Holders (LTHs), suggesting that the market is still in the early stages of an uptrend.

Capital inflows into Ethereum typically lag behind those into Bitcoin. While Bitcoin has received the majority of inflows, Ethereum has seen weaker speculative activity.

These factors suggest that Ethereum has underperformed relative to Bitcoin, raising investor concerns.

MetaMask, Ethereum’s leading crypto wallet, is introducing a new feature, Smart Transactions, to help users combat the impacts of maximal extractable value (MEV).

MEV is the additional profit blockchain operators can extract from users by previewing or reordering transactions before they are confirmed on the network. This is similar to front-running orders in traditional financial markets. This practice significantly affects Ethereum, increasing user costs, slowing down transaction speeds, and causing transactions to fail under certain network conditions.

The optional new feature, Smart Transactions, allows users to submit transactions to a “virtual mempool” before they are officially processed on-chain. This virtual mempool protects against certain MEV strategies, running simulations of transactions behind the scenes to help users achieve lower fees.

According to Jason Linehan, director of the Special Mechanisms Group at ConsenSys, MEV-related issues cost users around $400 million annually due to transaction reversals, stuck transactions, and predatory MEV front-running and sandwich attacks.

MetaMask’s solution, the virtual mempool, aims to address this problem. It’s the first step in a more comprehensive roadmap to overhaul how MetaMask handles transactions on Ethereum.

The virtual mempool concept shares similarities with a private mempool, a strategy gaining popularity for ensuring transaction privacy and protecting against MEV. However, ConsenSys emphasizes that its virtual mempool differs from private mempools and is essential for tackling Ethereum’s hidden costs.

When users send a transaction to Ethereum through MetaMask, it typically goes to a public mempool, where transactions await confirmation. This is where builders and searchers assemble transactions into blocks, which are then added to Ethereum’s blockchain.

However, these builders and searchers sometimes reorder transactions to maximize profits, resulting in higher costs, failed transactions, and user delays. MetaMask’s virtual mempool aims to address this issue.

MetaMask’s virtual mempool network, with its transparent operations and unique incentive scheme, distinguishes it from conventional private mempools. The Smart Transactions feature ensures better prices for users and simplifies tracking transaction progress directly from within MetaMask.

Jason Linehan describes Smart Transactions as the “concrete first step” towards MetaMask’s broader vision, laying the groundwork for future use cases like intent-based architectures.