Technology

Total Cryptocurrency Market Capitalisation Hits USD 2 Trillion Again

For the first time since May, the total market capitalisation of cryptocurrencies has rebounded above USD 2 trillion, according to some exchanges and data trackers like CoinGecko. This is reflective of the strong interest and the plethora of regulatory and technological progress that the ecosystem has seen for this past year. This ranges from the likes of J.P. Morgan allowing wealth clients access to crypto funds on demand, to Mastercard overhauling its crypto card programme, to Allianz implementing blockchain in order to streamline international motor insurance claims.

With this latest rise in value, total cryptocurrency market capitalisation now once again exceeds the market capitalisation of corporate titan Amazon – but it has reached this position in a third of the time it took for Amazon to grow from a bookseller to today’s technology giant. Blockchain is making strides towards becoming a mature industry and its use cases are starting to have an impact on the way traditional industries operate.

With the current rebound in market value, the health of the digital asset ecosystem as a whole also shows strong signs of improvement. Bitcoin dominance of the overall asset class fell from around 71% in January to a current level of 43.4%. This diversification of asset allocations within the cryptocurrency space shows that other projects are receiving funding, from both retail and institutional sources.

While total market capitalisation and price changes are relevant to traders and attract much attention, in the long term it is the success of specific projects that pushes blockchain technology forward. Around this time last year, Amazon’s valuation was roughly 15 times that of cryptocurrencies, however advancements such as the latest Ethereum hard fork or Cardano’s work on smart contracts continued apace. Ultimately, value will be driven by real transaction volumes and utility in preference to a speculative belief in future potential.

This rapid growth in value is both a sign of the exponential growth of technology and a guide to the future trajectory and value of crypto assets in general, as they move from today’s still relatively small and largely cryptocurrency-driven market to a future in which they underpin all financial instruments and services.

What Today’s ‘London’ Hard Fork Changes for the Ethereum Network

Ethereum is the second most used blockchain network in the world, second only to Bitcoin. Today marked a significant milestone in its development. The ‘London’ hard fork, as Thursday’s major upgrade is called, is part of a more extensive set of enhancements leading to Ethereum 2.0 that will effectively see the network undergo massive changes like changing from a Proof of Work model to Proof of Stake.

Arguably the most important aspect of the London hard fork is one of the five Ethereum Improvement Proposals (EIPs) that went live: EIP-1559. This protocol introduces transaction fee ‘burning’ to the Ethereum network. Before the update, each Ethereum transaction was accompanied by an additional sum in the form of a bid for miners to process it. This bid – known as the ‘gas’ fee – was made in small sub-units of the Ethereum network’s native cryptocurrency, ether, called gwei (1 gwei = 0.000000001 ether). The sender had to set a fee based on willingness to pay for space in the block of finalised transactions. Naturally, when the network is very busy, gas prices increase substantially due to competition for the miners’ processing services.

EIP-1559 changes this model completely by introducing a base fee (BASEFEE). This simply represents the minimum fee needed to be paid so that a transaction can be included in a block. The fee fluctuates depending on market congestion. The capacity of the network has been doubled, from a maximum of 12.5 million gas limit per block up to 25 million. There still remains the possibility to ’tip’ the miners to make a transaction more urgent, but this is optional. The base fee is destroyed or ‘burnt’ upon completion of the transaction.

The London hard fork changes a lot for Ethereum and for blockchain in general. Beyond the involved technical details of how the network is becoming more efficient and scalable, the world’s second most popular blockchain has undergone a massive upgrade to its core system without so much as a hiccup. Within the first 24 hours, 4,700 ETH was burned (c. USD 13 million). The vast majority of dApps (Decentralised Applications), most of the DeFi ecosystem, and many other payment systems and platforms are built on Ethereum. The fact that the network upgrade went by seamlessly is very encouraging for digital assets, as it proves yet again that the technology behind the hype is strong, tenable and increasingly mature.