Ethereum is migrating from a proof-of-work (PoW) to a proof-of-stake (PoS) governance mechanism in the foreseeable future, which will give The result is a faster and more efficient blockchain.
The Ethereum network has seen a considerable spike in transaction volume and size since DeFi and NFTs have captured the world of finance and art. This traffic has often caused systemic bottlenecks with significantly increased fees that have made the blockchain unsustainable.
To bring Ethereum into the traditional world and support a growing number of transactions, Ethereum was born. the need for substantial transformation. Upgrading from PoW to PoS will do so. Ethereum will be more scalable, efficient and sustainable, while ensuring its fundamental decentralization.
The update will occur automatically. only on the backend within a technical framework without affecting the way users transact and hold assets on the network. The Ethereum roadmap foresees the following three phases to complete the upgrade:
Phase 0, also known as the Beacon Chain
This update is already available. up and running, and implements “staking” in Ethereum. It lays the groundwork for future updates and will coordinate the new system.
the merger
The Ethereum mainnet, which is the current network, will have It will have to merge with the Beacon Chain at some point, and this is expected to happen in 2022. parking of the entire network and will indicate the end of energy-intensive mining.
Shard Chains
Shard chains are expected to start in 2023. However, sharding is a multi-phase upgrade to improve the scalability and capacity of Ethereum. Shard chains enable layer 2 solutions to offer low transaction rates while improving network performance.
Sharding is the process that allows smaller sets of nodes to process transactions in parallel without the need for network-wide consensus. Ethereum 2.0 promises to push transaction speeds up to 100,000 transactions per second (TPS) by deploying shard chains, up from 30 TPS today.
The transition from Ethereum to PoS has generated a heated debate within the cryptocurrency community. While some of the resulting benefits are clear, including scalability and sustainability due to a more energy efficient system, many fear that decentralization may be at risk due to its implementation.
The PoS validation process can be hampered by large validators that can have undue influence on transaction verification, thus affecting the verification of transactions. to the true nature of decentralization. Critics of the transition also see sharding as a threat to network security. Since fewer validators will be needed to secure multiple small shard chains, there is a higher risk that they may be more exposed to malicious actors.
How will it affect Ethereum 2.0 to the intrinsic value of Ether?
Many crypto experts believe that 2022 will be a decisive year for the price of Ether. The digital currency experienced It is an extraordinary increase since its launch in 2015, going from just $0.30 to a high of $4,800 in 2021, including some very volatile moves along the way.
Will it keep Ether its huge growth with the switch to ETH 2.0? While it is impossible to predict the price of any asset based on technical or fundamental analysis, crypto investors are unanimous in their belief that ETH 2.0 will have its day. There will be an impact on the intrinsic value of Ether, and much will depend on the value of Ether. of the smooth implementation of the update.
As with any significant transformation, the initial rollout of ETH 2.0 could be a direct cause of volatility. Until the upgrade is thoroughly tested, approved, and effective across the network, experts are predicting months of uncertainty that will inevitably affect the price of ETH.
In the long term, the transition to a more sustainable and efficient PoS will benefit the company. Ethereum adoption for users and businesses building on the platform. However, how and when this all plays out is cause for doubt among investors who are showing signs of caution with their allocation until there is a more accurate outlook.
Much will depend on the success of the resulting upgrade in terms of demand and functionality, and whether the refreshed platform will be able to deliver. maintain its leadership position among all other innovative competitors in the network.