Ethereum, which is a leading blockchain platform for decentralized applications, has been preparing for several years to enter a new phase of its operation. The update called ethereum 2.0 has been prepared by programmers since the beginning of the network, i.e. July 2015. Over the course of 7 years, many usability and scalability improvements have been implemented, but we can expect the end of the development shortly. What can we expect from this improvement and what will it mean for the market?
What is the Eth 2.0 update?
The assumption of the new version of the Ethereum blockchain is to use the consensus mechanism verifying the transaction via staking (Proof of Stake). Thus, it deviates from the Proof of Work model, in the case of which to perform a complicated mathematical function, the so-called hash, you need a computer with high computing power. Importantly, the level of energy needed is constantly increasing.
Suffice it to say that the average consumption for a single bitcoin transaction in 2022 is roughly several hundred transactions with VISA cards. To take another example, the current annual energy exploitation of Ethereum equals that of the whole of Finland. However, with ethereum 2.0, the carbon footprint “produced” by a cryptocurrency can be reduced by up to 99.95%. It is therefore a response to the probably most recent recent object.
What is the difference between Ethereum 2.0 and its original version?
In April 2022, Ethereum exists in parallel on two blockchains. The first one is based on the Proof of Work model (Ethereum Mainnet), while the second one, the test one, is based on the Proof of Stake (Beacon Chain) model. Their merger is to lead to the creation of a single unified blockchain.
It is worth mentioning that the developers responsible for Ethereum gave up the use of the ETH1 and ETH2 terms for fear of possible user confusion. Some investors who own Ether may be confused by the existence of two versions of the same token. For example, a user who decides to stack Ether on Coinbas notices that this one is converted from ETH1 to ETH2 (and their prices are identical). When the merge is successful, we will deal with one token.
Ethereum 2.0 and Bitcoin
Bitcoin along with Ethereum account for over 60% of the global cryptocurrency market capitalization. The value of the second most popular cryptocurrency, also known as “digital silver”, has increased by almost 650% in the last three years! In turn, “digital gold” in the form of bitcoin – only by 250%.
According to analysts, ethereum 2.0 has a chance to have a more attractive investment perspective from the point of view of ESG – Environmental, Social responsibility and Corporate governance. It should be noted, however, that this does not necessarily mean removing the leader in the form of bitcoin from the throne.
According to Chris Kline, COO and co-founder of the Bitcoin IRA cryptocurrency exchange, ethereum 2.0 and bitcoin are not really competitors. They are closer to complementary elements, jointly driving the market:
“Bitcoin and Ethereum serve different purposes. Bitcoin is a monetary crypto limited by individual assets, while due to its utility Ethereum is a kind of backbone of the next generation of the Internet in the form of Web3. Both cryptocurrencies and cryptocurrencies serve as essential and separate elements of the overall ecosystem of digital assets. “
In June this year, large eth 2.0 connectivity tests were completed using a dedicated test network called Ropsten. Thus, the next stage of the update work was completed, so that the developers only had to verify two additional networks. Then, all that’s left is to watch the next revolution in the cryptocurrency world! To check the current situation and the ETH course, please!