Editor's note: Bitcoin and Ethereum are up year to date as investors dip their toes back into cryptocurrencies. But we could see more gains to come in this volatile space... because according to Crypto Capital analyst Andrew McGuirk, one of these cryptos may have found the solution that could tip it over the edge into mass adoption.
Today, we finish out our two-part series, adapted from his April 12 Stansberry Digest. In this piece, Andrew explains why the potential breakthrough coming to the Ethereum blockchain could be transformative for investors – and for the industry...
This could mean big news for Ethereum's scalability...
Yesterday, I covered why this major cryptocurrency has a specific problem to solve before it can fulfill its potential. In short, its blockchain still can't handle transactions at the scale of traditional payment processors, like Visa (V).
But now, that solution may be here...
A technology that has been theorized since the dawn of cryptography in the early 1980s – zero-knowledge ("ZK") proofs – has finally been launched in a meaningful manner. And it could mean big news for Ethereum (ETH).
Here's why this technology may be the change the Ethereum blockchain needs to reach the next level...
A ZK proof is a type of mathematical proof that allows one party to prove to another party that a certain statement is true, without revealing any other information beyond the truth of the statement itself.
Say that you have a locked box, and you want to prove to me that you know the lock combination without telling it to me. You could ask me to close my eyes while you unlock the box. And upon opening my eyes, I could verify that the box is indeed unlocked. Since I didn't see you put in the combination, I have no information other than the fact that you know the combination.
This is clearly a simplified example. So let's think of it through another lens...
Imagine you want to prove to a bank that you have enough money in your account to make a certain transaction without revealing the exact balance in your account. This is possible with a ZK proof.
The true power of ZK proofs comes from their ability to enable trust between two parties without requiring them to disclose any sensitive information.
Here's how this applies to Ethereum and the blockchain...
ZK proofs help to enable a technique called "ZK rollups" for Ethereum. A rollup is a technology that allows for off-chain execution of transactions that are then bundled and compressed and sent to the main chain.
Bundling transactions together – rather than doing one at a time on the base chain – reduces the load of the blockchain and increases transaction throughput... all while including the same security of the base layer (in this case, Ethereum).
Suddenly, this change could effectively increase Ethereum's capacity by orders of magnitude.
This theory came to a head recently when Matter Labs and Polygon, two blockchain-development firms, released their long-awaited ZK rollups – called "zkSync Era" and "Polygon zkEVM," respectively.
According to the CEO of Matter Labs, Alex Gluchowski, "ZK rollups are the Holy Grail of scaling Ethereum..."
Increased transactional throughput for Ethereum means many more commercial use cases.
Take the ticketing industry, for instance...
I'm sure many of you have read or heard stories about the recent fiasco regarding Taylor Swift tickets. Bots and scalpers bought tickets in droves and marked them up to ridiculous amounts. As it turns out, blockchain fixes this.
Crypto Capital subscribers may be familiar with one of our recent recommendations that works to bring tickets to real-life events onto the blockchain, making the tickets provably legitimate. Not only that, but it lets folks exchange tickets on a peer-to-peer marketplace like Ticketmaster or StubHub, only without the ridiculous platform fees.
Ticketing companies, including one that's headquartered here in Baltimore, are already adopting this project. And I believe it's only a matter of time until this technology flips the ticketing industry on its head.
Now that transactional throughput on Ethereum is increasing, projects like these can become much more than just a niche.
The real-world applicability of the blockchain will become self-evident...
When it comes to the state of Ethereum today, I'm reminded of this quote from one of my favorite authors and philosophers on the markets, Nassim Taleb, from his book Fooled by Randomness...
You can be optimistic that the long-term growth trajectory is up and to the right, but equally sure that the road between now and then is filled with landmines, and always will be. Those two things are not mutually exclusive.
The cryptocurrency world has had a rough year in the headlines... But new work continues with its underlying blockchain technology, with the idea of improving its capacity and growing crypto's footprint for years to come.
And these breakthroughs have the potential to overhaul entire industries.
Editor's note: This new technology isn't the only reason to be interested in the crypto markets today. Right now, the Federal Reserve is getting ready to launch a new instant-money platform... one that means the U.S. dollar is effectively "going crypto." This rollout will affect every American with a bank account. But according to our No. 1 crypto expert Eric Wade, if you start preparing ahead of July, you could set yourself up to benefit... Get the full story now.
"Add these factors together... and that's why I'm predicting bitcoin will hit $80,000 soon – and potentially $1 million in our lifetimes," Eric Wade writes. Cryptos are scarce, low-inflation assets. And right now, conditions in the U.S. financial system are setting up a potential flood of demand... Learn more here.
Eric and his team at Crypto Capital have written extensively about what cryptos need to do to go mainstream. It all comes back to the "blockchain trilemma" Andrew described yesterday... Read more about how Ethereum's upgrade means it could soon achieve this breakthrough right here.