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Why is Ethereum Going Down?


Denis Goncharenko

September of this year was one of the most unfavorable periods. This is especially true for those crypto investors who made too big bets on Ethereum. It sank quite significantly in the first month of autumn: -13%. The indicator is not a record (in July it was 16%), but the news does not form an optimistic mood. Moreover, this period has already dragged on until November. Therefore, in this article, we will try to answer the question why Ethereum is going down.

Possible Reasons

Bitcoin in autumn also showed negative dynamics (-7%). Many analysts say: all these downturns are just rollbacks against the background of a strategic increase in the exchange rate.

Ethereum ranks second after Bitcoin, with quotes increasing by 830% for 12 months. Against this background, the decline in September seemed an insignificant event that was bound to happen.

In early October, both major currencies showed positive dynamics (+9%). The September rally provided food for thought for financial analysts. One of the main motives many experts call the passage of a difficult period for the Ethereum cryptocurrency itself.

The reason is that too large transaction fees worry many. In August, the update ("London") was activated, but it did not have a serious positive impact. The global problem remains: commissions have not lost their volatility.

Blockchains, which are called "gravediggers" of Ethereum, continue their destructive work. They operate with all the advantages of the cryptocurrency and are at the same time its direct opponents.

Another bad news: Ethereum had been damaged into two chains at the end of the summer. There was a glitch in the software, someone did not miss the opportunity to use this phenomenon. The network was attacked, similar cases observed repeatedly.

Mati Greenspan, the founder and CEO of Quantum Economics, remarked in an interview that the events that have taken place will attract the attention of speculators. In general, the formation process is not over yet, the market has consolidated and is rapidly increasing in size. Short-term pullbacks are normal, they should happen. Ethereum continues to be the main tool for many projects. There are still some barriers from competitors – they must be worked through in order to continue the evolutionary development

The Ethereum Split

The security threat to Ethereum is that there is one of the virtual books. Hence the statement follows: there is no chance of being generated out of thin air. Such books are necessary, since the blockchain does not have a single center, there are no banks that are located inside the chain. As you can see, there is no classical accounting and control. The founders of Ethereum were worried two months ago: failure in the chain appeared. What experts are talking about: there were two parallel transaction records in the system itself.

At one time there were questions:

1. How far is such a division wound up?

2. Will there be a “double-spending attack”?

The tools allow you to form various applications using complex codes. Thus, the need for processing operations by third parties disappears. Such an attack is difficult to implement; the reason is clear: which nodes are located on the right side of the partition, and which are not.

If we analyze the situation thoroughly, the miners and exchanges have updated the software. All this is a positive factor, the error was promptly solved.

Auston Bunsen (QuikNode) described the incident as "responsibly disclosed vulnerability". The expert knows what he is talking about, QuikNode makes good software. The opinions of experts confirm the idea that digital technologies and programs are far from perfect. An error can occur at any time, which is very dangerous, since the amounts sent are huge.

However, errors continue to appear

Crashes continue from time to time:

1. In the spring of 2021, the software issued an error, there was an increase in work. The program managed the login to the account.

2. Apps were damaged in November. It happened after the Geth update (short for Go Ethereum), the chains split. To get access to the blockchain, most users prefer to use the Geth software package (the total market share is 64%).

After the blockchain violation a few months ago, an investigation was conducted. The conclusion was made as follows: there was an error in the consensus mechanism in the Geth software. This block forms a single source, thanks to it, users see one "picture". At the same time, it does not matter which software is used.

Programmers had a new release, which fixed the problem. Many users have updated the programs, but not 100%. It is not surprising that there was a repeat of the failure. Ethereum is trying to form decentralization, but there are incompatibilities and software failures. A similar thought was expressed by Nic Carter, co-founder of blockchain data aggregator Coinmetrics.

Problems will always arise if there is an incompatibility of programs.

Bitcoin works on a different principle. At the core there is a high level of protection of software, blockchain nodes. Experts have set a task to avoid such difficult situations. Therefore, the strategy is built on the principle that all changes are made autonomously, and not imposed by a single volitional decision.

Ethereum has chosen the efficiency of information processing as a priority, but the task cannot be adequately solved due to the imperfection of programs. Some analysts claim that Ethereum bears the laurels of a pioneer and this is its only advantage.

Ethereum is a base for function of:

  1. A large percentage of NFT.
  2. DeFi solutions (78%).
  3. dApps.

However, the situation is gradually transforming, and competition is becoming tougher between blockchains. Complaints have been received before, long before the incident, mostly about the fees which are extremely high: at the beginning of the year there was a record: $70 per transaction. Just recently, the growth was more than 100% (from $20 to $46), then there was a rebound to $32.

‘Ethereum killers’

The size of the commissions for many users seems too large, it repels many. Vitaliy Coleman, one of the experts of the web platform Slosspot, which specializes in expert reviews of online casinos and crypto casinos, shared some interesting information about the players. Despite the high commissions, ethereum casino remain one of the most popular types of crypto casinos for players. But “killers” began to workturn, for example, Cardano or Solana.

The latter showed a fantastic growth of 4800% in just one year. Solana continues to increase volumes, especially in the NFT and DeFi ecosystems. They cost much less than Ethereum and function more quickly.

More than fifty thousand transactions are processed for one second, the commission is $0.00025. If we make comparisons, they will not be in favor of ETH (14 transactions every one second). It has already been said about high commissions.

In Solana, money flows in a rapid stream. A deal from Polychain Capital for 314 million was recently closed. Investors have already begun to diversify assets into various crypto currencies. This strengthens alternative blockchains such as Algorand, Solana and Cardano.

Solana is confidently moving towards the goal of becoming a necessary blockchain. There has not yet been a sign of centralization, so that the vast masses of users are completely satisfied. Still, no one is immune from wrong steps. A month ago, Solana was attacked, the failure lasted for 17 hours. The problems were caused by a huge number of transactions coming from bots.

Any Strengths?

Ethereum is also being improved, Ethereum 2.0 has already been created and will be launched early next year. Users expect that mining will be simplified. The efficiency of work will grow to 100 thousand transactions per second (an increase of 7 thousand times).

If everything is done correctly, then the Ethereum 2.0 star will be a revolutionary event for the world of crypto currency.

Conclusion

Technology is developing rapidly. There is a high probability that Ethereum will restore its shaken authority and become one of the leaders again. In the first half of 2022, we will learn the names of the leaders. There is a high probability that Ethereum will not give up its position and we will no longer ask the question why is Ethereum going down?


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