The value of Ether (ETH), which has significantly outperformed Bitcoin’s (BTC) returns, has increased over the past year. Ethereum’s rise has made it more profitable to mine on the network. This seems to have led to an increase in miners and a consequently, an increase in the network’s hashrate.
According to Glassnodes data on Jan. 27, the Ethereum hash rate has reached a record high of 1.11 PH/s. The previous ATH was achieved on Jan. 13, when ETH prices dropped from $4,460 down to $3,160.
If the hash rate increases, it means that more nodes join the network and that the network is becoming decentralized. This helps cement blockchain security. If the hash rate drops too low, it can be harmful to the network. This is because there will be fewer nodes and therefore less security.
Participants in Ethereum’s network implemented the Arrow Glacier upgrade in December 2021. This delayed the switch to proof-of-stake consensus. This means that Ethereum mining still has a lot of work ahead. Before reaching ETH2, also known as The Merge, it is necessary to transition from the Proof of Work (PoW), algorithm to the Proof of Stake(PoS) algorithm. The difficulty bomb will sound at that time, effectively shutting down ETH mining.
ETH will not be mined after the switch to proof of stake. Instead, transactions will be validated through staking on specific nodes.
The network’s current hash rate is greater than one petahash. This number corresponds to approximately 1,000 TH/s. It indicates that the network hash rate has increased more than 66,000% in the past three months since it was first recorded on the network.
Related: Bitcoin hashrate jumps to ATH after Jack Dorsey confirms Block’s mining system
According to Cointelegraph, Ethereum Foundation has criticized the branding for Eth2, claiming that it didn’t accurately reflect the nature of the network’s upgrades. According to the post, “ETH2” as well as the terminology used for distinguishing a proof of-stake chain and a proofof-work chain could be phased out soon.
We’ve removed all uses of ‘Eth2’ terminology on https://t.co/v9gxnMUQFz Find out why https://t.co/84uJXSD4q1
— January 24, 2022, ethereum.org (@ethdotorg).
The reasons for this shift include a poor mental model for first-time users as well as scam prevention, inclusion and stake clarity. The transition from a PoW consensus mechanism to a PoS consensus system is expected to take place in the second or third quarter this year.