Ethereum has been a powerful force. Although Ethereum has had major problems, other coins have been created to address them. Ethereum 2.0 will be the first release.
Despite the fact that Ethereum (ETH) was created six years before Bitcoin (BTC), and the introduction blockchain technology, the digital asset Ether has become the second most valuable cryptocurrency in terms market capitalization. It surpasses coins like Litecoin, Ripple, Dash (DASH), Monero (XMR), and Monero(XMR), which were all launched prior to it.
The Ethereum blockchain technology is the main reason for its meteoric rise.
Vitalik Buterin (Canadian-Russian programmer, co-founder of Ethereum) explained to Business Insider how the Ethereum blockchain was created to address Bitcoin’s “limited functionality.”
The Ethereum blockchain aims to encourage innovation through the development of decentralized apps (DApps). This is the foundation for nonfungible tokens, or NFTs, and the Metaverse concept.
Although Ethereum solved the issue of limited functionality, it doesn’t address the main concerns with Bitcoin or other blockchains. It relies heavily upon the proof-of work (PoW), consensus.
PoW consensus is used by Bitcoin and Ethereum to address major problems such as low scalability and network congestion.
Ethereum is now preparing to move to proof-of stake (PoS), in the soon to be launched Ethereum 2.0.
Proof-of-work vs. proof-of-stake
A consensus mechanism is used to verify transactions on a blockchain. This helps ensure that no two people spend the same amount of money. The consensus mechanism is used for validating transactions, adding them to the blockchain, and creating new coins. PoW and PoS serve as the main consensus mechanisms to accomplish this.
Proof-of work is a consensus mechanism that uses mining to verify transactions. Each computer in the network must solve the puzzle. The first person to complete it gets to verify the latest transaction and add it onto the blockchain. The network rewards the person who solves the puzzle by verifying the transaction with tokens.
Although PoW is important for the security of the blockchain’s network, the problem with this consensus mechanism is the association it has with mining. While trying to solve these mathematical puzzles, the computers that are involved in mining consume a lot of energy.
According to data from University of Cambridge, Bitcoin uses more power than Argentina and the Netherlands. This has significant implications for the environment.
Due to their dependence on mining, blockchains such as Ethereum that process a lot of transactions are slower in terms of transaction speed. This can lead to network congestion and higher gas prices.
PoS uses staking rather than mining to verify new transactions are added to the blockchain. PoS requires that coin holders stake their coins in an exchange, which validates new transactions.
PoS also eliminates environmental concerns associated with mining, which allows transactions to be completed quicker and at lower costs.
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The death of Ethereum
Networks known as Ethereum killers seek to take down Ethereum by solving its blockchain problems, such as low scalability and high fees. They plan to do this by using the proof-of scale consensus mechanism. Among the most prominent are Polkadot, Cardano and Tezos.
Cardano uses Ouroboros as a security protocol and consensus protocol. It is based on PoS. Ouroboros is used to scale the Cardano blockchain, which allows for faster transaction speeds and lower fees.
Cardano’s Hydra Project aims to improve its speed by over 300%. Cardano currently processes 250 TPS. The developers are currently working on scaling solutions to achieve a 1000 TPS. Because it uses a PoS consensus mechanism, the Cardano blockchain is both energy efficient and addresses environmental concerns that are associated with Ethereum and Bitcoin blockchains.
According to Cardano ecosystem tracker Cardano Cube, Cardano also boasts 579 decentralized apps (DApps). According to State of the DApps, this number is significantly lower than Ethereum’s almost 3,000 DApps that have more than 50,000 users per day and 126,000 transactions daily.
Tezos, another contender, stands out because of its unique governance model.
Tezos is unlike other blockchains in that it is self-governed, meaning users have the ability to upgrade and make design choices. It is the “blockchain designed to evolve” because it has its own governance and not a team of developers.
Tezos uses PoS as well as its liquid proof-of–stake (LPoS), which allows coin holders to transfer their tokens’ validation rights to another user without losing ownership.
Tezos also has an upgrade called Octez V13, which, according to the team will increase its transaction speeds from 215 TPS up to almost 1,000 TPS.
In order to make it faster and more secure, the Solana blockchain uses a fundamental building block known as decentralization. This is done by incorporating a core network node that acts as a secure time determinant that all network members agree on. This is called proof-of-history.
Tower BFT is a PoS consensus mechanism that Solana uses to speed up transactions. It is based on PoH. Solana is also the blockchain with the highest staked worth of $37billion. It can process up to 50,000 transactions per second with extremely low fees. These fees range from $0.00001 to $0.00025.
Many reports have indicated that Solana transactions were failing because of instability. The Solana blockchain experienced major network congestion sometime in January. This lasted more than 30 hours and resulted in transaction failures, and then liquidation. Bots were spamming the network by creating duplicate transactions.
Solana doesn’t yet have many DApps. DappRadar reports that the largest PoS blockchain only has 71 decentralized apps in various categories, including gaming and decentralized finance (DeFi).
Noting that Solana is the largest platform for nonfungible tokens, (NFTs), is also important. CryptoSlam reports that Solana’s 24-hour NFT sales volume was approximately $23 million at the time of writing.
Ethereum had planned to move to PoS right from the beginning, and substantial preparations have been made. The Ethereum 2.0 (or Serenity upgrade) aims to improve the scalability and transaction speed of the Ethereum blockchain.
Eth2 will go into effect in three phases.
On December 1, 2020, the Beacon Chain’s first phase went live. This marked the beginning of the upgrade. Holders have the option to stake tokens during the Beacon Chain phases, which will be completed as part of the launch.
The Merge is the second phase, which is scheduled to take place in Q2 2022. It will integrate the Beacon Chain into Ethereum’s mainnet.
George Harrap, cofounder of Step Finance, believes that transaction throughputs and fees will still be an issue for Ethereum. He also noted that they are likely to be resolved in the future, even though other layers 2s and blockchains have done “exceptionally well” in combating them.
Harrap stated to Cointelegraph, “Ethereum still has a lot to do to compete there, but The Merge continues to make progress.”
Bart, a pseudonymous community moment supporter and operation supporter for Harvest Finance believes that The Merge is a significant step in establishing Ethereum as the original blockchain and “the best chain”. Cointelegraph was informed by Bart that layer-2s such as Arbitrum and Optimism would continue to grow in strength. “Alt-chains such as Polygon, Avalanche, and Solana have experienced strong growth in recent years and I expect this trend to continue after The Merge.”
Users will see the biggest change in their lives now that anyone can become a validator, provided they have 32 Ethereum. This is the key reason to switch to proof-of stake. “Proof-of-work is more complex and requires more technical knowledge, hardware and technical skills to set up,” Bart explained to Cointelegraph.
Kadal Stadelman, chief technology officer at Komodo, isn’t optimistic about Eth2. Cointelegraph was told by Stadelman that the major Ethereum-killers will continue to thrive even after The Merge occurs because they have “the major benefit of extremely low gas prices for end-users.” He said that it will only alter the way blocks are made.
“I don’t believe that The Merge will result in an influx of new Ethereum projects. Projects will likely adopt Ethereum layer-2 solutions until Ethereum gas fees are significantly reduced. It is more likely that new projects will continue using alternative blockchain networks offering layer-1 scalability, Ethereum Virtual Machine/Solidity compatibility, and Ethereum Virtual Machine/Solidity compatibility.
John Letey (co-founder of KYVE) spoke out about data validation after-Merge. He said that while many people are interested in the variety of changes The Merge will bring to society, data validation was not a major topic of discussion.
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Letey says that historical data will not be needed to validate the chain once The Merge has taken place. This means that there won’t be any incentive for nodes carrying this data around. EIP-4444, which proposes to automatically remove data older than one calendar year, was created. This means that full nodes and Remote Procedure Call endpoints (RPC), won’t be in a position to sync directly from the chain and will need to rely upon centralized endpoints.
“New nodes will need to access their data from a snapshot. He said that services providing truly decentralized access for validation and storage will be essential to projects rather than an option.
The so-called Ethereum Killers are seeing an opportunity as the problems with the second largest blockchain continue to increase. Ethereum’s PoW mechanism processes only 15 transactions per second, while competitors can handle thousands.
Ethereum 2.0, on the other hand is believed to solve many of the problems that the Ethereum mainnet has. The project is expected to be finished next year. However, the crypto community expects that the second phase, The Merge, will be completed in the second quarter. These issues are still to be resolved fully.