The much-anticipated eth2 release was successful. Here is all you may want to know about cryptocurrency’s top tale this year.
The 2nd-most valuable crypto by market cap, Ethereum, completed its much-anticipated system upgrade on 15 September. The move, known within the crypto community as the Ethereum Merge, targets to reduce energy costs and introduce the groundwork for increased cryptic technology usage in mainstream applications such as finance. Though the upgrade represented the most highly awaited event in cryptocurrency’s history, the process remains complicated. Here is what you should know.
What’s Ethereum?
Ethereum is a distributed ledger and publicly-viewable blockchain that verifies & records all network transactions. The Canadian programmer and Russian-born Vitalik Buterin conceived the platform in 2013. The only difference between Ethereum and Bitcoin is the former supports smart contracts.
‘Smart’ contracts are blockchain-stored computer programs that automatically complete various actions after meeting certain conditions. They allow multiple individuals to create various financial institutions, like lenders & decentralized exchanges, and other digital coins on the ETH blockchain.
What’s The Merge?
The years-long work has transformed how the Ethereum blockchain verifies transactions. Ethereum started operating on two parallel chains in December 2020 – one utilizing a legacy system to authorize transactions, while the other network used PoS (proof-of-stake) for creators to test and advance. Meantime, the recent Merge connects the two platforms into one with a PoS consensus for validations.
Ethereum, similar to BTC and other lesser-recognized digital assets, previously depended on platform participants (miners) computing intricate mathematical problems for transaction validation – the PoW (proof-of-work) process. Meanwhile, the efforts rewarded miners with newly mined tokens.
Nevertheless, ETH’s new process will depend on the PoS (proof-of-stake), eliminating the need for crypto miners. Remember, proof-of-work platforms have recently seen scrutiny for utilizing massive electricity. The proof-of-stake mechanism uses little energy to validate transactions.
What’s Proof-of-Stake?
The Proof-of-Stake system means companies or people serving as validators (not miners). They stake their Ethereum coins (ETH or ether) as collateral for transaction validation and network security. Meanwhile, validators receive incentives through additional Ether coins as rewards.
How PoS Will Heighten Ethereum Security
The PoS consensus decides about upgrading the ETH blockchain through votes by the crypto holders. Voting power relies on the staked ETH amount. Top holders (validators) should invest 32 ETH. Also, they should partake in some duties to ensure the blockchain’s integrity, like authorizing transactions by other validators.
Meanwhile, misbehaviors like authorizing invalid transactions can see their staked coins destroyed. The rule of monetary punishment for misbehaving validators also makes the blockchain secure from a 51% attack, where bad actors control more than 50% of the platform, allowing them to alter the blockchain to their wishes.
What the Migration Mean for ETH’s Energy Consumption
The Eth2 release will likely reduce Ethereum’s electricity consumption by a whopping 99.95%. Indeed, proof-of-work cryptocurrency mining consumes a massive electricity amount. BTC and Ethereum were utilizing more energy than Argentina or Sweden before ETH2.0.
For instance, in BTC-friendly Texas, mining gobbles around 3% of local electricity demand amidst peak usage & could make for a 3rd of new power demand in Texas in the coming decade. However, crypto contributes to massive emissions that trigger climate change. That’s because markets are yet to discover reliable renewable energy sources to supplement the crypto mining industry.
Meeting the new electricity demand remains a challenge. Some states had to restart retired firms to burn fossil fuels due to crypto mining, heightening the climate change effect. Also, crypto mining leads to nearly 38 kilotons of e-waste (electronic waste) per year.
Electronic waste remains dangerous as it contains harmful substances like lead, arsenic, or mercury, which might cause cancer or neurological issues. Digiconomist analyst Alex DeVries believes ETH’s proof-of-stake would decrease its e-waste dramatically.
What are your opinions about Ethereum’s latest upgrade? Some analysts mean the altcoin will surpass Bitcoin with time. Feel free to share your thoughts in the section below.