The release of the new version of the Ethereum network is getting closer. The developers promise many useful improvements. Skeptics expect problems with the transition to a new consensus mechanism. What will ordinary users actually have to face?
The founder of the Ethereum network, Vitalik Buterin, said at the ETH Shanghai Web 3.0 developer summit that the network could switch to Proof-of-Stake (PoS) as early as August. This is a tentative timeframe, Buterin said, as there are some risks due to which the transition to Ethereum 2.0 may be shifted to September-October.
Since the Ethereum (ETH) coin mining difficulty, referred to as the “difficulty bomb”, may fall just in time for August, the merger may indeed be pushed back a few months. Ethereum developers have announced that the migration of the main Ropsten test network to PoS will take place in early June. And only after numerous tests will the exact transition date be announced.
How Ethereum 2.0 will differ from the old version of the network
The much anticipated network update by developers and holders of ether coins will be designed to increase security, scalability and significantly increase throughput.
The throughput of Ethereum should increase through the introduction of sharding technology, which will allow the blockchain to be divided into 64 mini-chains, shards. Shards will process transactions and data in parallel. The sharding system will not be activated at the same time as the merger, and is scheduled to launch in 2023.
The current network can only process about 30 transactions per second, while Ethereum 2.0 promises processing speeds of up to 100,000 transactions per second.
When using Proof of Work (PoW), the time to create blocks is determined by the difficulty of mining. But on PoS, the pace is fixed. Time in Proof-of-Stake Ethereum is divided into slots (12 seconds) and epochs (32 slots). One validator is randomly selected as the block proposer in each slot. This user is responsible for creating a new block and sending it to other nodes on the network. Also in each slot, a committee of validators is randomly selected, whose votes are used to determine the validity of the proposed block. The Ethereum website has detailed instructions.
The update should improve the security of the network and eliminate the possibility of the so-called “51% attack”, when miners controlling more than 50% of the blockchain can theoretically make changes to the blockchain, fraudulently making money on it.
How the transition will affect the price of Ethereum
As the bandwidth of Ethereum 2.0 will increase and transaction fees will decrease, this should attract both ordinary crypto investors and large technology companies who want to participate in a potentially profitable project. In addition, due to the transition to a new version of the network, the release of new coins may be reduced by 90%, which will reduce supply and increase demand. The most optimistic forecasts say that the price of Ether could return to its all-time high of $4,800.
However much depends from the moment of transition. If the merger goes smoothly, without scandals of bugs and outages, then the price of ETH will be relatively stable. Coinpedia analysts considerthat the availability for ordinary users that Ethereum 2.0 promises will allow the coin to reach a value of $12,900.
In all optimistic forecasts, a fundamental factor in the success of the Ethereum network is the fact that most of the market for non-fungible tokens (NFTs), as well as most of the DeFi projects, are on this blockchain. Accordingly, the growth in the popularity of NFTs in the future will, to one degree or another, affect the growth in the popularity of Ethereum.
What problems the transition promises for ordinary users
One of the main risks for users who want to become validators in the new network will be possible bugs and desynchronization of the blockchain. There are currently five clients running Ethereum 2.0: Lodestar, Lighthouse, Nimbus, Prysm, and Teku.
To become a validator, a user needs to run one of these clients. Last April, a bug was discovered in the Prysm client, due to which about 70% of validators lost the ability to create blocks on the network. This resulted in validators not being able to receive block rewards.
Creative Director of Bits.media Alexandra Demidova, during her speech at the international forum Blockchain Life 2022, spoke about how users should behave during the transition of the network to the new version.
Firstly, you should refrain from large transfers of ether and tokens, as there is always a risk that something will go wrong. For example, a blockchain out of sync could cause money to be stuck in limbo indefinitely.
Secondly, users should not move their assets to the new version of the network, since all the necessary changes occur behind the scenes and are invisible to them. Better to do nothing at all. Everything will happen automatically.
How Ethereum 2.0 will affect mining
After a full transition to Ethereum 2.0, the network will no longer use the Proof-of-Work consensus mechanism, that is, it will become impossible to mine new coins using mining. ETH 2.0 implies a complete absence of miners. There will only be validators that create blocks and validate transactions.
The proof-of-stake mechanism introduces another problem: in order to participate in the formation of blocks, users will need to have a large amount to stake, since someone who holds a lot of coins is more likely to mine a block. To become a validator, the user will have to deposit 32 ETH, which at the current rate is about 3.6 million rubles.
However, it is realistic to take advantage of the opportunities of joint staking: get together with other users in a pool, use a lending service, transfer ethers to a crypto exchange or any other platform that offers separate rewards for staking. Bits.media explained in detail the nuances of all three modes.
Again: miners should remember that staying in the old network on the Proof-of-Work (PoW) consensus mechanism will not work. Therefore, they should consider moving to other PoW networks or selling their equipment on the secondary market. If miners want to mine exactly ETH, then it’s time to start stocking up on coins in order to use them for staking in the future.
How to counter the hyped scammers
There have already been cases of the appearance of intruders who are trying to take advantage of the situation. As we get closer to the release of Ethereum 2.0, a growing number of allegedly caring citizens will begin to offer users help with transferring their ETH from the old network to the new one. Or offer to take coins for storage, until better times.
Respectable users should consider buying cold walletin order to store your cryptocurrencies on it and always check from which sources applications working with Ethereum are downloaded, so as not to become a victim of phishing.
Source: Bits
I’m James Harper, a highly experienced and accomplished news writer for World Stock Market. I have been writing in the Politics section of the website for over five years, providing readers with up-to-date and insightful information about current events in politics. My work is widely read and respected by many industry professionals as well as laymen.
