Ethereum, the second blockchain in the world by market capitalization after Bitcoin, is about to receive an important update aimed at drastically reducing the energy consumption of the network and preparing the blockchain for future evolutions.
After years of work, Ethereum will switch from the more energy-intensive Proof of Work protocol to Proof of Stake to validate the blocks in which transactions are recorded.
In practice, it will no longer be necessary to solve a cryptographic test through dedicated hardware devices, but a certain amount of cryptocurrency, the ethers, must be blocked in order to be chosen to create the new blocks.
Such an update will reduce the energy consumption of the Ethereum network by 99.95%according to official estimates, and will render mining operations as known to date on Ethereum useless.
The end of the Proof of Work on Ethereum
The transition from Proof of Work to Proof of Stake is relevant because it profoundly alters the mechanism underlying the issue of new ether, which are given as a reward to those who keep the network safe.
On Bitcoin this is done through the Proof of Work system: cryptographic calculations that require dedicated hardware are solved, which in turn consumes a lot of electricity because it has to stay on all day and each miner is in competition with the other; therefore, the better the hardware, the more likely you are to “win” the creation of each new block, which occurs approximately every ten minutes.
The Proof of Stake protocol totally changes the system: it will be necessary to block, in a process known as “staking”, 32 ether in a validator node in order to enter the pool of users who can be randomly chosen to create new blocks and therefore validate the transactions that must be registered on the Ethereum network.
In fact, the hardware will no longer be needed and anyone with enough ether will be able to create new blocks; also for this reason we speak of “validators” and not of “miners” in the case of Proof of Stake. Users can also organize themselves into a “pool” to pool 32 eths and share the earnings.
“Validators perform the same function as miners, but instead of spending their assets initially on energy expenses, they accumulate ETH as collateral against dishonest behavior“, which can harm the health of the blockchain (by entering fake transactions, for example), the official website reads.
The issuance of new ethers is balanced by the ethers which, starting with the update called “London”, are burned to validate the transactions (i.e. they are not put back into circulation): in the estimates, the ethers burned and those issued will be in equal quantity, so as to arrive at a “zero inflation”. At the time of the Ethereum update it will not be possible to immediately withdraw the prizes obtained for the generation of new blocks: a further update, called “Shanghai”, will be needed to do so.
Reducing power consumption is actually the main benefit of the upgrade. In fact, on the official website it is specified that after the merger the “gas fees”, that is the tariffs linked to each transaction, will not be reduced, nor will the transactions be faster.
The Ethereum blockchain is used for many purposes, from the sale of Non Fungible Token (digital assets whose ownership is certified on the blockchain) to “smart contracts”. There are many transactions to be validated and this means that the long queue often requires long waiting times; therefore, many users have long been asking for a solution that speeds up validation times.
“In theory, you should be able to manage transactions more easily and faster. But it is above all theory”Commented Marco Cavicchioli, cryptocurrency expert and popularizer, speaking of the Ethereum update. “Bitcoin has provided another solution, the Lightning Network, which provides even faster transactions “.
The Lightning Network is a second level of the Bitcoin blockchain above the main one: when a user wants to send or receive bitcoins, he opens a payment channel with another person; the executable transactions are many and instantaneous, but only the opening and closing of the channel are recorded on the Bitcoin blockchain. This solves the problem of slow transactions.
“Vitalik Buterin himself (founder of Ethereum, ed) said that in order to have very low costs, a second level on Ethereum will be needed “, adds Cavicchioli. “There is no comparison between a second level and a blockchain that writes all transactions to the ledger”.
The nature of the Proof of Stake model, in which you need to have enough ether to be able to create new blocks, is sometimes considered as an element in contrast with decentralization because the consensus mechanism is delegated to those who have significant shares of the cryptocurrency. Is that so?
“In my opinion no“, says Cavicchioli.”The Proof of Stake system reduces decentralization, that’s for sure. Ethereum, however, is already less decentralized than Bitcoin: there are 10,000 public Bitcoin nodes and there will be 2,000 of Ethereum. We are already in a situation where Ethereum is less decentralized than Bitcoin“.
One of the limits of Ethereum is represented by the hardware resources required to run a complete node of the network, much higher than those of bitcoin, whose node can also be run on very light devices: for a complete node of Ethereum, 4 to 8 are needed. GB of RAM and a SSD of at least 2 TB. This has as its counterpart a greater difficulty in expanding the network and therefore decentralization compared to Bitcoin.
Why do we talk about “Merge”?
The update is officially known as “Merge”, ie the “merger”. From 2020, Ethereum has a second blockchain based immediately on the Proof of Stake, called the “Beacon Chain”: at the time of the update, the main blockchain, called “Mainnet”, and the secondary one will be merged.
“The Ethereum Mainnet – with all accounts, budgets, smart contracts and the status of the blockchain – continues to be secured by the Proof of Work, even while the Beacon Chain is performed in parallel using the Proof of Stake“, is mentioned on the official website.”With the imminent merger these two systems will finally be put together and the Proof of Work will be permanently replaced by the Proof of Stake“.
In fact, this is all we know for sure: how it will happen and at what time is in doubt. The nature of the matter stems from the decentralization of Ethereum: the Ethereum Foundation cannot force node owners and miners to accept a blockchain upgrade.
What will happen next
“The only lever is the updates: if you don’t install the updates from the Ethereum Foundation, you end up using the old version that no longer works with the new one”, Underlines Cavicchioli. “What the Ethereum Foundation knows for sure is that at some point all of the old blockchain will be integrated into the new one as if it were a sub-blockchain. At that point, transactions should be done on the new blockchain; but nothing prevents them from doing them on the old one too“.
Hence the first hitch: will any new transactions carried out on the old blockchain be considered valid?
A second theme is that of the various projects carried out on top of the main blockchain, the so-called “layer 2” or second level: each of these is independent from the others and potentially someone could go directly to the new blockchain born from the merger and others not.
“There is no certain path. What we know today is that once the merger takes place the old blockchain will be integrated into the new one and in theory only the new one will be used. When they have decided that the process is completed, then they will unlock the ethers that are staking on the new blockchain: that will be the terminal moment.“.
There are also conflicting opinions on the idea of being able to issue new cryptocurrency, in this case ether, disconnecting this process from the “physical work” envisaged by the Proof of Work system. Those who support the Proof of Work system tie the time and money invested to mine cryptocurrency to legitimize the issuance of new cryptocurrency. According to this version, in fact, after the update, the emission of ether will be at almost zero cost because it will not be necessary to perform any work, but only to deposit ether in a node.
“The Proof of Work protocol only makes sense on Bitcoin”, According to Cavicchioli. “It is so demanding that it makes sense to do it only on one cryptocurrency, the most important one. The Proof of Work was decided for Ethereum because when it was born with respect to the Proof of Stake there was some doubt. The Proof of Work system, in short, was the best solution at that time, but there has always been talk of switching to Proof of Stake“.
Cavicchioli defines the passage of any cryptocurrency other than Bitcoin to the Proof of Stake protocol as “inevitable”.
“Tron, in particular, works great with Proof of Stake: it has no problem. We now have a lot of evidence that the Proof of Stake model works. We also have evidence that there are problems: the blocks that sometimes involve Solana are an example“.
These problems have led to various service interruptions for the Solana blockchain, in these years, which lasted many hours.
A 20-year-old developer took over the Solana blockchain by creating 11 fake identities
Go to the deepening
#Ethereum #ready #change #merge #effects