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      Home Technology Crypto Currency

      Ethereum 2.0 What Crypto Fanatics Need To Know

      Nathaniel Augustine by Nathaniel Augustine
      September 14, 2021
      in Crypto Currency, Technology
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      Ethereum is a critical component of the blockchain industry because it is the largest token creation platform and smart contract platform. ETH – the coin that powers everything from simple transactions to complex applications – is at the heart of this innovation.

      Ethereum


      Having said that, there is still a lot of work to be done before the Ethereum network is ready for widespread adoption. At the moment, a massive upgrade known as Ethereum 2.0 is being phased in.


      What exactly is Ethereum?

      Ethereum is intended to enable more decentralized information networks through a network of distributed nodes and Ethereum wallets. Below, Abra CEO Bill Barhydt interviews Ethereum founder Vitalik Buterin about the Ethereum vision.

      ADVERTISEMENT

      See Also: 9 Effective Ways to Boost your Storytelling Skills Even if you are a Newbie Writer

      Why Is Ethereum Getting Better?

      Even before Ethereum’s launch in July 2015, one of the network’s most significant known limitations was its inability to scale. With an average transaction rate of around 30 transactions per second (TPS), the Ethereum blockchain has gone through some growing pains.

      Ethereum

      Because of its accessible tools and advanced smart contract logic, Ethereum has attracted a wide range of decentralized applications (dApps). Despite its scalability limitations, Ethereum is a very popular platform for building on.

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      The issue is that as the network experiences a sudden influx of users, the fees required to pay for transactions on the Ethereum blockchain have skyrocketed. These are known as gas fees.

      See Also: Expertnaire: How to Make Consistent 6 Figures Online Even If You don’t have a Product of Your Own

      For example, the sudden popularity of CryptoKitties in December 2017 was the first time the network’s scalability challenge was truly exposed. With the increased use of Uniswap in mid-2020, gas fees reached previously unheard-of heights.

      It has frequently resulted in issues for the average user attempting to send ETH to someone or interact with one of the many NFT platforms built on Ethereum. For example, there have been numerous instances where the cost of gas exceeded the amount of money that an end-user wished to send.

      Ethereum

      To overcome these obstacles, Ethereum developers have spent the last few years focusing on implementing new scalability upgrades. These technical changes affect not only developers and technical users, but everyone who uses the network.

      What Exactly Is Ethereum 2.0?

      The goal of Ethereum 2.0 is simple: reduce transaction fees in order to make the Ethereum network suitable for mass adoption. Everything boils down to blockchain consensus. This is how network validators agree on the validity of transactions.

      The network is transitioning from Proof-of-Work (PoW) to Proof-of-Stake (PoS) as a means of blockchain consensus with Ethereum 2.0. This will allow the network to scale from its current 30 TPS to a theoretical maximum of 2,000 to 3,000 TPS. Additional enhancements via other scalability solutions are expected to increase this capacity to 100,000 TPS.

      What does this imply for the typical user? The Ethereum blockchain will evolve into a network capable of processing payments in seconds rather than minutes, all at a fraction of the current cost.

      At the heart of this is ETH, which is used to pay network gas fees. Ethereum 2.0 is expected to usher in a new wave of developer and enterprise adoption. As a result, more applications are expected to be built on the platform.

      See Also: 9 Easy Ways To Make Money From Your Passion.

      The Hard Fork of London

      Such a dramatic improvement does not happen overnight. The transition from PoW to PoS is a lengthy process that will take years to complete. This goal is dependent on a few key milestones.

      The London Hard Fork is one of them, a network upgrade that went live on August 4, 2021. Ethereum can implement changes to the network known as Ethereum Improvement Proposals (EIPs) via hard forks. The London\ Hard Fork is widely regarded as the most significant upgrade in the network’s early history.

      Five new EIPs will be introduced, the two most important of which are EIP 1559 and EIP 3554.

      Ethereum

      EIP 1559 consumes a portion of the gas fees generated by each network transaction. This is a source of contention among validators because it reduces the revenue generated by validating transactions.

      EIP 3554 postpones the difficulty time bomb until December 2021, from August 2021. The goal of this proposal is to give more time to make the transition from PoW to PoS as smooth as possible.

      The London Hard Fork will bring Ethereum one step closer to completing the PoS upgrade, but there are still some steps to be taken (e.g. Shanghai Hard Fork tentatively planned for October 2021).

      It is still too early to tell whether the London Hard Fork was a success or not, but early indicators indicate that it is.

      The Advantages of Switching to PoS

      Proof-of-Work validators (a.k.a. miners) are currently profitable in mining ETH and are still in the current system. Some are opposed to these upgrades, while others believe the short-term impact on miners will be worth it in light of the long-term benefits to ETH as a whole. The transition to PoS is expected to benefit the vast majority of users and the general public.

      PoW necessitates a significant investment in mining rigs (specialized hardware) that consume a significant amount of energy. The Bitcoin network’s use of non-renewable energy resources for Proof-of-Work consensus gained media attention in 2021.

      Ethereum

      Ethereum also consumes a lot of energy, but that will change once the network switches to Proof-of-Stake. According to the Ethereum Foundation, the network will become 99.5 percent more energy efficient as a result.

      Proof-of-Stake is also a more egalitarian solution because it is free to stake ETH, whereas mining ETH can result in net negative returns in bear markets. The annual rate of return for staking ETH is expected to range between 4% and 10%, and a few platforms have begun to offer an easy route to staking ETH in preparation for the upgrade.

      Staking is not a new technology. Several coins, including Cardano (ADA), Polkadot (DOT), and Solana (SOL), are already using PoS blockchain consensus to secure billions of dollars in cryptocurrency. Users who stake (lock) funds to secure their respective networks receive varying yields paid in their native coins. ETH will soon join the ranks of these PoS networks.


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      Tags: blockchainCryptoETHEthereumTechTechnology
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