The Effect of Ethereum’s Proof of Stake Update on Ethereum Price Using the Long Short-Term Memory Method

Abstract

Cryptocurrency is a digital or virtual currency secured by cryptography. Using cryptography, this digital currency is nearly impossible to counterfeit. All transaction records are stored on the blockchain. Ethereum is one of the cryptocurrencies, along with Bitcoin, etc. Ethereum was first created in 2013 by Vitalik Buterin, a professional programmer, with the goal of building decentralized applications. Ethereum was launched in 2015 with its own cryptocurrency called ether. Proof of Stake (PoS) is the underlying mechanism that activates validators after receiving sufficient stake. For Ethereum, users need to stake 32 ETH to become validators. The objectives of this research are to understand the general overview of ETH prices in the past two years, assess the effectiveness of transitioning from Proof of Work (PoW) to PoS, and explore the application of long-short-term memory (LSTM) in price prediction. The results of this research indicate that the LSTM model is well-suited for predicting prices with a sufficiently large and complex dataset. The evaluation parameters, including the root mean square error (RMSE) with a value of 130.109, the mean squared error (MSE) with a value of 16928.408, and the mean absolute error (MAE) with a value of 92.9926, show that the performance of the LSTM model is good.