Cryptocurrency Ethereum 2.0 coming in August?

Ethereum entered the cryptosphere in 2015. The platform quickly gained popularity. Today it is the second largest cryptocurrency by capitalization behind Bitcoin. Its founders have always expressed the desire to enhance its architecture by migrating proof of work (PoW) at Proof of Stake (POS). The start of the Beacon Chain on December 1, 2020 already marks a first step towards this protocol change: Ethereum 2.0 is getting closer. The new version is announced for next August. Is it time for the big change?

For the environment, The Merge is coming soon

The Fusion: Understanding the Ethereum merger

Merge or fusion, what is that exactly? Ethereum will change the way transactions are validated. In its current state, Ethereum works similarly to Bitcoin. In other words, miners solve complex mathematical puzzles on a network of computers to secure transactions. It is that proof of work (PoW) or proof of work. This system is very energy intensive.

Ethereum wants to switch to a consensus mechanism that uses much less energy: the Proof of Stake (PoS) or Proof of Stake. This system relies on cryptocurrency holders. Ethereum currently operates both mechanisms. Fusion combines the two layers into a single chain based on the Proof of Stake (POS).

On the way to a greener and faster Ethereum

The current model is both reliable and secure. Nevertheless, PoW requires a lot of energy to verify new transactions and add them to the blockchain. Indeed, miners must use powerful and therefore energy-intensive computers.

Next to it, the PoS asks for the ” validators Participate in the network’s consensus protocol. Instead of competing to solve math problems, two-thirds of all active validators must agree that a block of transactions is valid before it can be added to the blockchain. With the PoS system, the validator only needs a single computer that can interact with the Ethereum blockchain and run software.

With this migration, Ethereum 2.0 promises to reduce the platform’s power consumption by 99.9%. In addition to becoming a sustainable cryptocurrency, users can expect a more secure and scalable Ethereum. The merger should also make Ethereum faster and cheaper to use.

The Merge: the main stages of migration to Ethereum 2.0

The founders of Ethereum have been talking about this merger project since 2016, just a year after the cryptocurrency was launched. The migration takes place in several phases. Here are the highlights.

The beacon chain

The first phase, the official release of the Beacon Chain, has been in effect since 2020. This is a major improvement that guarantees increased scalability and optimizes network capacity. The main function of this blockchain is the management of the protocol Proof of Stake (PoS) and all network shard chains. The beacon chain also includes functions such as managing validators and their stakes. This chain also acts as an anchor where the shards store their states and facilitate transactions between them.

The release of a multi-client testnet for Ethereum 2.0

As a DeFi (Decentralized Finance) platform, various labs and companies are developing their own implementation of ETH 2.0 clients. This means that there are multiple code bases, all communicating using the same protocol. Eventually, Ethereum will be able to support multi-clients, all able to talk and communicate with each other through the network of the same name. On April 28, 2020, a multi-client testnet for Ethereum 2.0 was released by Prysm and Lighthouse. This test allows ETH2 clients developed by different labs (Prysm, Lighthouse or Casper) to communicate with each other.

The merger is scheduled for August

The merger was first proposed in 2016. However, as the phases progress, developers and everyone involved face many challenges. The migration was pushed back to 2017 and then to 2020. No firm timeline has been released, but some researchers are pinning June for the merger.

However, Tim Beiko, the developer of the Ethereum Foundation, denied that this information was circulating on the networks. He explains: “The merger will not happen in June, but probably a few months later”. On the sidelines of the Permissionless event, Preston Van Loon, Ethereum lead developer, assures that if all goes according to plan, the merger will go into effect soon. This could happen as early as August.

Ready to merge

What implications for investors?

Current ETH holders have nothing to do after the merger. It’s entirely possible to dive into the new version by staking or helping to test upgrades. Otherwise, the wealth does not change. To understand why, you need to think of the changes as a simple software upgrade. This is a backend change. If nothing changes for ETH traders and users, the story is very different for miners going obsolete.

Conclusion

Ethereum’s update to DeFi technology will surely increase the value of Ethereum for years to come. The token is considered revolutionary for the network. On the other hand, the question of risks always arises in connection with major changes. There is no such thing as zero risk, regardless of the technology mentioned. However, in anticipation of a failure, there are four unique PoS backups. In the event of problems, participants using the network can switch to one of these four devices. All indications are that Ethereum will retain its status as the leading smart contract blockchain. Nothing prevents them from eventually becoming the new leader in cryptocurrency… subject to the hard work of the developers, of course.

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Emile Stantina

Interested in investment and financial markets after attending business school in Chambéry, passion for cryptocurrencies was evident. The blockchain is certainly the universal tool of tomorrow.


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