For investors, is now the most suitable time to enter the market? After experiencing the bull and bear markets, what are the leading projects and potential projects in the current Ethereum ecosystem? What are some of the popular and highly discussed projects related to the Ethereum ecosystem?

Author: Climber, Golden Finance

With the approval of the Bitcoin spot ETF, the speculation surrounding Bitcoin in the market has come to an end. The price of BTC has also dropped from around $49,000 to $41,000, and the community's discussion and investment focus are gradually shifting towards the Ethereum ecosystem and concepts.

Previously, the BTC ecosystem experienced a significant increase, while Ethereum, known as the "king of the myriad chains," did not see a substantial increase, especially with L2 track currencies showing lower-than-expected gains. However, the price of Ethereum recently broke through $2,700, reaching a new high since June 2022, and related concept sectors such as L2, LSD, ReStaking, and modularization also experienced significant increases.

The market generally believes that after Bitcoin, the Ethereum spot ETF will also be approved, and the upcoming Cancun upgrade is also a major positive. In the future, projects related to the Ethereum concept will become the focus of investment.

So, is now the most suitable time for investors to enter the market? After experiencing the bull and bear markets, what are the leading projects and potential projects in the current Ethereum ecosystem? What are some of the popular and highly discussed projects related to the Ethereum ecosystem?

I. Two Major Positive Expectations: Cancun Upgrade and Ethereum Spot ETF

1. What is the Cancun Upgrade?

On January 17, the Goerli testnet's Dencun hard fork was officially completed, followed by the Sepolia and Holesky testnets. Once Dencun runs smoothly on all three testnets, it will be scheduled to be activated on the Ethereum mainnet.

What exactly is the Cancun upgrade? And why does it need to undergo three testnet inspections before being deployed on the Ethereum mainnet?

The Ethereum Cancun upgrade (also known as the "Cancun-Denver" upgrade) is the result of joint efforts by Ethereum to enhance its infrastructure and address unresolved issues after the Shanghai upgrade.

The Ethereum Cancun upgrade aims to introduce the Proto-danksharding concept to enhance the scalability, security, and efficiency of the Ethereum network. Danksharding refers to the final stage of the Ethereum 2.0 ("Tranquility" phase) upgrade, which aims to strengthen data management and transaction processing.

The Ethereum Cancun upgrade was initially planned for October 2023 but has now been postponed to the first half of this year.

The Cancun upgrade is based on four Ethereum Improvement Proposals (EIPs): EIP-4844, EIP-1153, EIP-4788, and EIP-6780. The goal of the Cancun upgrade is to increase the network's transactions per second (TPS) to over 100,000 TPS, consistent with the Ethereum roadmap's "Surge" phase.

The Ethereum Cancun upgrade will bring a series of benefits, including increased transaction processing speed, reduced transaction costs, optimized data, and improved cross-chain communication. This upgrade also aims to simplify data processing and improve overall network efficiency by introducing the concept of transactions carrying Blobs.

Looking back at the Shanghai upgrade on April 12, 2023, Ethereum saw a significant increase in price. A month before the upgrade, the price of ETH was $1,368 on March 7, but after the anticipated speculation, it rose to a phase high of $2,141.54 around the upgrade date, an increase of approximately 56.54%.

2. Ethereum Spot ETF

The significant increase in the price of BTC due to the approval of the Bitcoin spot ETF is evident, and the discussion surrounding the approval process of the Ethereum spot ETF has entered the market.

BlackRock CEO Fink stated that he sees the value of launching an Ethereum ETF; Matrixport stated that Ethereum's performance in the future will be better than Bitcoin's.

However, whether the Ethereum spot ETF can be approved and when it will be approved has become the focus of discussion.

Previously, the U.S. SEC has sued multiple cryptocurrency exchanges for listing crypto assets considered securities, including tokens from other L1 chains such as SOL, NEAR, and ATOM. However, none of these enforcement actions classified Ethereum as a potential security.

On January 13, JPMorgan strategist Nikolaos Panigirtzoglou stated in an interview with The Block that for the SEC to approve an Ethereum spot ETF in May, Ethereum needs to be classified as a commodity (similar to Bitcoin) rather than a security. However, this is far from certain, and he believes that the likelihood of the SEC classifying Ethereum as a commodity before May is not more than 50%.

However, the analyst also stated that the SEC had already approved an Ethereum ETF holding commodity futures contracts in October last year, providing clear information that Ethereum is considered a non-security.

According to information disclosed on the SEC's official website, the final approval deadline for the Ethereum spot ETF is May 23.

II. Ethereum Concept Projects Worth Paying Attention To

Multiple cryptocurrency research institutions generally believe that the Cancun upgrade is the most important positive factor for Ethereum in 2024, and Ethereum's resurgence will also promote the prosperity of the L2 ecosystem and drive the popularity of LSD, ReStaking, modularization, and other tracks.

1. L2

On January 12, according to L2BEAT data, the total value locked (TVL) in Ethereum Layer2 surpassed $23 billion, reaching a historical high.

Currently, the competition in the L2 track is fierce, with advantages and disadvantages for both new and old public chain projects. For investors, while being familiar with a certain old public chain, it is also important to closely monitor the movements of emerging forces.

In general, L2 projects worth paying attention to include:

Polygon (MATIC):

Polygon Network uses Plasma technology to process off-chain transactions, which are then recorded on the Ethereum chain to achieve high transaction throughput. In theory, Polygon can process 65,536 transactions per second on a sidechain at close to zero cost.

Some well-known projects such as Aavegotchi, Decentral Games, Easyfi, Neon District, Polymarket, and SushiSwap are all using Polygon as their infrastructure.

Arbitrum (ARB):

Arbitrum is a layer 2 blockchain for Ethereum that uses optimistic rollups for scaling. The Arbitrum blockchain uses rollups to merge multiple transactions into one, reducing on-chain transaction costs and improving scalability.

As a result, Arbitrum can achieve a throughput of up to 40,000 transactions per second with much lower miner fees than the Ethereum mainnet.

Optimism (OP):

Optimism is the first Ethereum L2 solution to develop an Optimistic Rollup solution compatible with the Ethereum Virtual Machine (EVM).

Optimism runs parallel to Ethereum, enabling large-scale transaction processing while inheriting Ethereum's security, with the main feature being the reduction of on-chain transaction costs. Optimism provides Ethereum developers with the opportunity to use all available tools on Ethereum without the need for modifications.

The development team has stated that transaction fees for traders will be reduced by 10 times. Additionally, Optimism addresses fraud and invalid state transition issues using Optimism rollups.

Immutable X (IMX):

Immutable X is a layer 2 scaling solution dedicated to solving NFT and web3 gaming on Ethereum. Currently deployed on Ethereum, using IMX allows for secure, carbon-neutral trading of NFTs with zero consumption.

IMX's ZK-rollup technology STARK proof, developed by Starkware, combines hundreds of off-chain NFT transactions and generates an encrypted proof of validity to ensure transaction validity. Additionally, IMX encapsulates this ZK-rollup scaling solution in a set of powerful REST APIs, allowing developers to easily build their NFT applications.

SKALE (SKL):

SKALE Network aims to reduce transaction costs and provide network participants with high throughput by introducing scalable Web3 sidechains through the SKALE chain. By creating a scalable sidechain compatible with EVM and interoperable with Ethereum, SKALE addresses technical issues and improves the performance of any application.

MetisDAO (METIS):

MetisDAO announced the construction of "the first hybrid Rollup ever, combining optimistic Rollup architecture with zero-knowledge proofs." Additionally, Metis plans to be the first to decentralize its sequencer in a Layer 2 network, eliminating the risk of single sequencer failure by launching an innovative sequencer pool.

Cartesi (CTSI):

Cartesi is an application-specific Rollup protocol with a virtual machine running Linux distributions, creating a richer and more extensive design space for DApp developers.

Cartesi Rollups provide modular scaling solutions deployable as L2, L3, or sovereign Rollups while maintaining strong foundational security guarantees.

2. LSD, ReStaking

Since the Shanghai upgrade last year, the concept of liquidity staking has become increasingly popular, and with the arrival of the Cancun upgrade, this related concept remains significant.

Lido Finance (LDO):

Lido DAO is a staking solution provider for Ethereum 2.0, Terra, Solana, and Kusama. Users staking with Lido can maintain control and liquidity of their staked tokens. LDO is the native token of the project.

Rocket Pool (RPL):

Rocket Pool is an Ethereum 2.0 staking pool. The protocol aims to reduce the capital and hardware requirements for Ethereum 2.0 staking, enhancing the decentralization and security of Ethereum. To achieve this goal, Rocket Pool allows users to stake trustlessly with node operators.

Ankr Staking (ANKR):

Ankr Earn enables easy staking, liquidity staking, and other earning opportunities for any cryptocurrency investor. Ankr has created the most scalable and decentralized staking infrastructure solution, addressing the capital inefficiency issues of proof-of-stake networks and similar blockchain consensus mechanisms.

Pendle (PENDLE):

Pendle is a yield trading protocol that separates income-generating assets into principal and income portions, allowing users to earn periodic or on-demand income. PENDLE is a utility token for liquidity incentives, governance, and fee value accrual.

EigenLayer:

EigenLayer is a middleware protocol based on Ethereum that introduces the concept of re-staking, allowing Ethereum nodes to re-stake their staked ETH or LSD tokens into other protocols or services that require security and trust, thereby gaining dual income and governance rights.

It also allows the utility of the Ethereum consensus layer to be extended to various middleware, data availability layers, sidechains, and other protocols, enabling them to enjoy Ethereum-level security at lower costs over time.

3. Modularization

Some believe that the crypto industry will increasingly see Ethereum becoming a modular blockchain. This means that Ethereum is increasingly relying on external execution layers and data availability layers to advance its foundational performance.

Celestia (TIA):

Celestia modularizes the technology stack of blockchain networks, decoupling the consensus layer and execution layer. As a consensus layer, it only handles transaction transaction ordering and data availability verification, while specific transaction execution is decentralized to other execution layer networks linked to Celestia (such as Celo).

Injective (INJ):

Injective is a blockchain layer built using CosmosSDK, enabling secure, fast, and interoperable transactions across multiple blockchain networks. Injective is specifically designed to address the limitations of popular smart contract platforms and is optimized for decentralized applications (DApps) in the decentralized finance sector. It supports all financial primitives, creating a comprehensive ecosystem offering various financial products and services.

Manta (MANTA):

Manta Network is a gateway for modular ZK applications, establishing a new paradigm for L2 smart contract platforms using modular blockchains and zkEVM.

Manta Pacific addresses availability issues through modular infrastructure design, allowing modular DA and zkEVM to seamlessly integrate, enhancing the user experience over time.

Mantle (MNT):

Mantle Network is the first core product of the Mantle ecosystem, dedicated to expanding Ethereum's L2 technology stack. Mantle Network is compatible with the Ethereum Virtual Machine (EVM). Its modular architecture separates transaction execution, data availability, and transaction finality into multiple modules, which can be individually upgraded and adopt the latest innovations.

Dymension:

Dymension is a sovereign Rollup built on Cosmos, aiming to simplify the development of RollApps (RollApps focused on custom applications) through the Dymension Chain (settlement layer), RDK (RollApp Development Kit), and IRC (Rollup Interchain Communication).

In summary, since the last bull market, Ethereum's performance has been mediocre, but the market remains optimistic about it. This year is undoubtedly the period with the highest certainty of an Ethereum concept surge since the last cycle, making it a potentially high-yield investment opportunity to focus on related concepts at this time.

The crypto market has always been enthusiastic about new opportunities, so investors can try to focus on the newly emerging Ethereum concept projects in this cycle, as they may contain the next hundredfold coin.

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