“Protocol upgrades change mechanics, not incentives.” — DNA Crypto.
Enough Speculation as Ethereum 2.0 is Set to Launch in September
Ethereum’s move to proof-of-stake may still be at the dock. Preston Van Loon, the Ethereum core developer, announced to a panel that the move would enter its final stages in the next three months. He said that September was the most reasonable timeline for the move. Justin Drake, a panel member, expressed a strong desire to make it happen by September. Justin and Preston have repeatedly referenced the “difficulty bomb” in this context; they are referring to the event known as
The Merge.
A Merge is the process by which the proof-of-stake beacon chain is merged with the existing Ethereum blockchain. Hence, the Ethereum network will shift from mining-based to staking-based. Individuals with high-performance supercomputers operate a mining-based network to earn Ethereum. On the other hand, staking is when Ethereum users deposit coins to earn rewards.
It is important to note that the core developers didn’t choose September randomly. In May, Ethereum Core developers agreed not to upgrade the network to delay the Merge, which will begin to destabilise the network. The Merge is a blockchain constituent that deliberately slows the network. Its main intention was to drive the move to proof-of-stake among developers and to ensure miners found it challenging to remain behind once the initiative was launched. Although it is still in the testing phase, Ethereum Core developers have chosen to give it their full attention. If completed smoothly, the Merge would render the difficulty bomb useless.
Both proof-of-work and stakeholder incentives aim to ensure the network is not only secure but also decentralised. However, proof-of-stake offers more advantages than proof-of-work. Proof-of-stake, for example, uses significantly less energy while also making it easier for individuals to run a network. Therefore, proof-of-stake is more secure and decentralised than proof-of-work. However, the primary reason Ethereum holders worldwide are waiting for the Merge is that it reduces Ethereum issuance by up to 90%. Fewer issuance means the demand outweighs the supply; thus, the coin’s price skyrockets. Currently, CoinMarketCap data show
that a single ETH coin is worth about $2,000. The Merge is expected to push Ethereum to its highest price, surpassing its November 2021 price of $4,891.
Signs of proof of stake could be seen as early as December 2020, during the completion of Phase 0, referred to as “Ethereum 2.0, which is a set of renovations to scale the network and make it safer. However, at that time, it was simply a beacon chain. It was a proof-of-stake network, but it could not be relied on to perform any function. Therefore, holders can only lock their Ethereum coins into it in hopes of future profits; however, The Merge will change that.
Ethereum 2.0 is not the network’s final upgrade. A key component of Ethereum 2.0 is sharding, a strategy that enables the Ethereum network to be subdivided into multiple chains. According to the Ethereum Foundation, authenticators will only be required to validate data for the entity (shard) they are validating, rather than the entire network. The foundation adds that this strategy will significantly and immediately reduce hardware requirements.
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Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
