CRYPTO MOVERS AND PRICES
Bitcoin (BTC) is outperforming and threatening a decisive breakout at USD 16,000. Beyond BTC, Ethereum (ETH) is the only other Top 10 trading positive.
Crypto Story of the Day
According to a post-mortem published by Péter Szilágyi, team lead at the Ethereum Foundation, the recent chain split centers around new code introduced in July to fix a bug on Go Ethereum, one of several software options needed to run a node on the network. Yesterday’s chain split was caused by node operators who weren’t running the latest version of Go Ethereum, which included the fix.
According to Szilágyi, “A transaction managed to trigger the consensus issue, splitting old Geth releases off from the rest of the network.” This consensus failure caused major disruption across the industry: Binance briefly suspended withdrawals and its CEO Changpeng Zhao wrote that, despite the venue running its own Ethereum node and not relying on third parties, it couldn’t be sure which version of the blockchain their node was reflecting.
The split also caused Infura, which provides interfacing with the Ethereum blockchain, to shut its service down. Firms, such as Coinbase Wallet, Metamask, UniSwap and Compound, across the industry use Infura to bypass the need for maintaining the entire Ethereum blockchain themselves. ETH continued to rally for hours following the initial reports of the split. The asset has recorded gains of about 15% since the Ethereum 2.0 deposit contract went live last Thursday, which is considered a key technical milestone ahead of the network’s proof-of-stake launch.
We’ve frequently highlighted the emerging risks as Ethereum approaches its supposed transition to proof-of-stake. Not only do we think there’s a high probability of dissent in the community on the move, increasing the likelihood of a hard fork, but Ethereum developers have a mixed history of success when upgrading. Last night’s unplanned split highlights more risk to the far more complicated transition and the likelihood of issues. In spite of this, ETH actually outperformed BTC and others for the better part of yesterday’s session.
There’s plenty of precedent in the space with the market responding, seemingly inappropriately to on-chain issues. For example, ETH Classic’s spate of 51% attacks this summer were frequently ignored by that market. In spite of the market’s benign initial take, we continue to view ETH cautiously.