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 a desire to upgrade their architecture, moving from Proof-of-Work (PoW) ag Proof of Bet (PoS). The launch of the Beacon Chain on December 1, 2020 already marks the 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?
The Merger: Understanding the Ethereum Merger
Merger, or fusion, what exactly? Ethereum will change the way transactions are certified. In its current state, Ethereum works much like bitcoin. In other words, miners solve complex mathematical puzzles on a computer network to secure transactions. It’s the Proof-of-Work (PoW) or Proof of Work. This system is very energy intensive.
Ethereum wants to move to a consensus mechanism that uses much less energy: the Proof of Bet (PoS) or Proof of Promise. This system depends on the holders of the cryptocurrency. Ethereum currently runs both mechanisms. Fusion combines the two layers into one chain based on the Proof of Bet (PoS).
Towards a greener and faster Ethereum
The current model is reliable and secure. However, PoW requires a lot of energy to verify and add new transactions to the blockchain. Miners need to use powerful, and therefore energy-intensive, computers.
Next to it, the PoS calls the “ validated participate in the network consensus protocol. Rather than competing to solve math problems, two-thirds of all active validators must agree that a transaction block is valid before it can be added to the blockchain. With the PoS system, the collector only needs one computer that can interact and run software related to the Ethereum blockchain.
With this migration, Ethereum 2.0 promises to reduce the platform’s power consumption by 99.9%. As well as being a sustainable cryptocurrency, users can expect a more secure and scalable Ethereum. The Ethereum Merge should make it faster and cheaper to use.
Merger: the main stages of the migration to Ethereum 2.0
The founders of Ethereum have already talked about this merger project since 2016, just a year after the launch of the cryptocurrency. The transition occurs in several stages. Here are the highlights.
The Beacon Chain
The first phase, the official release of the Beacon Chain, is in place from 2020. This is a major improvement that guarantees increased scalability and maximizes network capacity. The main function of this blockchain is to manage the protocol Proof of Bet (PoS) and all network shard chains. The Chain Beacon also has functions such as validation management and their stakes. This chain also acts as an anchor where the shards save their states, facilitating transactions between them.
Multi-client testnet release for Ethereum 2.0
As a DeFi (decentralized finance) platform, various laboratories and companies are developing their own implementation of ETH 2.0 clients. This means that there are multiple source codes that communicate with the same protocol. Eventually, Ethereum will be able to support multiple clients that are able to talk to each other and communicate with each other through the network of the same name. On April 28, 2020, Prysm and Lighthouse released a multi-client test network for Ethereum 2.0. This test allows ETH2 clients developed by different laboratories (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 stages progress, there are many challenges for developers and all stakeholders. Migration has been postponed until 2017 and then until 2020. No fixed timetable has yet been issued, but some researchers have promised in June for the merger.
However Tim Beiko, developer of the Ethereum Foundation, refused to spread this information on the networks. It declares: “The Merger will not take place in June, but probably for a few months”. On the sidelines of the Permissionless event, Preston Van Loon, Ethereum’s lead developer, confirms that the merger will soon be effective if everything goes according to plan. This could happen as early as August.
What impact for investors?
Current ETH holders have nothing to do after the merger. You can fully immerse yourself in the new release by applying or assisting upgrades. For the rest, the assets do not change. To understand why, you need to see the changes as a simple software upgrade. This is a backend change. If nothing changes for ETH traders and users, the situation is quite different for obsolete miners.
Ethereum’s update of DeFi technology will certainly increase the value of Ethereum in the years to come. The signal for the network is considered revolutionary. But on the other hand, the question of risks always arises in the context of major changes. There is zero risk, regardless of the technology mentioned. However, in anticipation of any failure, there are four unique PoS backups in place. If participants using the network have problems, they can switch to one of these four devices. All indications are that Ethereum will maintain its status as the main blockchain of smart contracts. Nothing will stop him from finally becoming a new leader in cryptocurrency … subject to hard work from the developers, of course.
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Interested in investment and financial markets after a business school in Chambéry, the passion for cryptocurrencies was evident. The blockchain is definitely the universal tool of tomorrow.