How to determine whether ETH upgrade is good or bad

Judgement methods: 1. Upgrade content and goals; 2. Upgrade content and goals; 3. Impact on the ecosystem; 4. Upgrade implementation process, etc.

To determine whether the ETH upgrade is good or bad, you can start from the following aspects:

Update content and goals

• Technical improvement: If the upgrade aims to improve transaction speed, reduce transaction costs, and enhance network scalability, such as the EIP-3074 proposal in the Ethereum Pectra upgrade, it can make transaction speed cheats and significantly reduce GAS fees, which is usually a favorable factor. If the upgrade can solve long-term technical problems and improve network performance, it will attract more users and projects and drive price increases.
• Security enhancement: If introducing new security mechanisms, such as moving from PoW to PoS, improving network security, reducing potential attack risks, and providing users and developers with a more reliable environment, it is generally beneficial.
• Economic model adjustment: Upgrading changes the issuance, destruction or pledge mechanism of ETH, making ETH more scarce. For example, after the "merger" is upgraded, Ethereum becomes a deflationary asset, which may reduce market supply and support prices, which is a positive factor. However, if the adjustment leads to an increase in ETH supply, it may put pressure on the price. For example, the Dencun upgrade and introduces a blob trading mechanism, which weakens the ETH destruction effect and leads to supply expansion, which has a certain negative impact.

Market expectations and reactions

Investor sentiment: After the news of the upgrade was released, investors were generally optimistic and bought a large amount of ETH. The market was bullish and was very strong, which usually indicates that the upgrade was regarded as a favorable situation by the market. You can pay attention to the speech and emotional tendencies of investors on platforms such as cryptocurrency forums and social media, as well as the views and predictions of professional analysts.
• Price trend: Before upgrading, if the ETH price rises ahead of schedule, it reflects the market's positive expectations for upgrading, which may be a positive one. However, you need to pay attention to the situation of "buy expectations and sell facts". If the price rises excessively before the upgrade, it may be beneficial to overdraft in advance. In addition, you can also refer to related derivative markets, such as changes in positions and trading volume of ETH futures and options. If the number of call options increases, it may indicate that the market is optimistic about upgrading.
• Fund flow: Observe the flow of funds. If the upgrade news comes out, a large amount of funds flow into the Ethereum ecosystem, including investors transferring ETH from the exchange for a long-term holding, or investing more funds into projects based on Ethereum, which is generally a positive signal.

Impact on the ecosystem

• Attractiveness to developers: Upgrading the introduction of new smart contract functions, reduce development difficulty, and provide a more friendly development environment, it can attract more developers to build applications and projects on Ethereum, inject new vitality into the ecosystem, and promote the improvement of ETH value, which is a good thing.
• Compatibility with existing applications and projects: If the upgrade causes a large number of existing decentralized applications and smart contracts to not work properly, and developers need to make large changes and migrations, it will have an impact on the ecosystem, affect the user experience, and may cause market concerns, which is a negative factor.
• Driven on related industries: If the upgrade can promote the integration of the Ethereum ecosystem with other fields, it will drive the development of Layer2 network, pledge services, money storage and other related industries. For example, Pectra upgrades are beneficial to the second-layer network, pledge, money storage, etc., and will enhance the overall competitiveness of Ethereum and have a positive impact on ETH prices.

Upgrade implementation process

• Technical stability: The upgrade process is smooth, the test network and main network upgrades are carried out as planned, and there are no technical failures, vulnerabilities or security problems, which helps to enhance market confidence and is a good thing. If there are problems such as node synchronization and smart contract abnormalities during the upgrade process, it will cause market panic and lead to negative news.
• Community Consensus: The Ethereum community has extensive support for the upgrade plan and reached a high degree of consensus, which is conducive to the smooth progress of the upgrade and will also make the market more confident in the prospects of upgrading. If there are serious differences within the community, it may lead to network forks, affecting the stability and consistency of Ethereum, which is a negative factor.

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