Ethereum is a smart contract platform that enables developers to build tokens and decentralized applications (dapps). ETH is the native currency for the Ethereum platform and also works as the transaction fees to miners on the Ethereum network. Ethereum is the pioneer for blockchain based smart contracts.
The most anticipated event in crypto space this 2022 is over… now what? Learn about some of the changes and expectations that The Merge brings, as well as Ethereum’s next steps.
- The Merge ended: What’s next for Ethereum?
- Goodbye mining. Validators and a deflationary ETH are coming.
- PoS reduces power consumption.
- No, the merger didn’t solve everything.
- Sharding y las próximas actualizaciones de Ethereum.
This week a historic event took place for Ethereum a decentralized open-source blockchain with smart contracts functionality. and the whole ecosystem Blockchain a distributed ledger system. A sequence of blocks, or units of digital information, stored consecutively in a public database. The basis for cryptocurrencies. in general: “The Merge“.
The second largest blockchain successfully deployed its long-awaited update in which it abandoned its previous consensus consensus is achieved when all participants of the network agree on the order and content of the blocks in the blockchain. mechanism of proof of work (PoW) and changed it to proof of participation (PoS).The Mergein Spanish the merger was a multi-year development that made ETH mining a process where blocks are added to a blockchain, verifying transactions. It is also the process through which new bitcoin or some altcoins are created. obsolete and brought about a number of changes to Ethereum .
Ahead of this milestone, we’ll go over some of the most significant changes the merger brings – and those it doesn’t – as well as some expectations and tentative next steps for the project, which is still far from reaching its broader goal of scalability.
Goodbye mining, hello validators
Until now driven by miners, one of the most relevant changes in theThe Mergeis that Ethereum will no longer rely on intensive energy use to extract new blocks and secure the network. The Proof of Work (the mechanism currently used by the Bitcoin the biggest and most popular cryptocurrency in the world. It is a decentralized digital currency that enables users to make trustless peer-to-peer transactions. ) means that the network is protected by miners, computers with high computing power that use electricity to solve complex mathematical calculations to issue new blocks and provide security the term securities refers to a fungible and tradable financial instrument that carries a type of monetary value. to the network.
Miners from all over the world connect to the network in exchange businesses that allow customers to trade cryptocurrencies for fiat money or other cryptocurrencies. for a reward and a share of the transaction fees. Proof of stake swaps miners for validators who, instead of using power, hold ETH funds as collateral collateral is any asset that a lender accepts as a form of security to ensure that the borrower repays a loan. to mine blocks and provide security to the network, a process called staking participation in a proof-of-stake (PoS) system to put your tokens in to serve as a validator to the blockchain and receive rewards. (stake or stake). Similar to miners, validators enjoy an incentive for their activity, which translates into a percentage of the annual return for wagering their tokens .
In the words of the developer of Ethereum , Tim Beiko, la merger changed the need for the use of ” physical resources ” by ” financial resources “ to secure the network a network refers to all nodes in the operation of a blockchain at any given moment in time. . “ The Participation Test is how to run an application on your MacBook “, he said in conversation with CoinDesk . “ Obviously, your MacBook plugs into the wall and uses electricity. But no one thinks about the environmental impact of running [an app]. “Beiko added.
More decentralization? Remains to be seen
Some PoS advocates argue that such a model also ensures decentralization, as it makes attacks more costly and counterproductive (validators can be punished if they try to damage the network), as reported in an article in the journal.
While with mining the amount of energy used dictated who had control over the network, in the case of PoS it is dictated by the amount of money wagered. However, the data published a few hours after theThe Mergeseemed to show evidence of significant centralization on the web Ethereum and the success – or failure – of this model remains to be seen.
More energy efficient
The proof of work has been widely criticized due to its high electricity consumption and high impact on the environment, which, depending on the energy source used, can translate into a significant contribution to carbon emissions. According to some estimates a single transaction of Ethereum as a working test used 200.05 kilowatt hours (kWh) of electricity, comparable to the amount of energy used by the average American household in a week.
The Mergecompletely alters this dynamic. According to reports, the merger reduced the energy use of Ethereum emissions by 99.988% and carbon dioxide (CO2) emissions by 99.992%. The co-founder of Ethereum and main spokesperson for the project, Vitalik Buterin, said in a tweet que The Merge global energy consumption decreased by 0.2 %. This is arguably one of the largest decarbonisation efforts in history.
“The merge will reduce worldwide electricity consumption by 0.2%” – @drakefjustin
– vitalik.eth (@VitalikButerin) September 15, 2022
Since the change change — a concept relevant to cryptocurrencies that use the UTXO model — is the number of coins sent back to a user after they use their unspent outputs to initiate a transaction. made mining obsolete, many ETH miners contributors to a blockchain taking part in the process of mining. They can be professional miners or organizations with large-scale operations, or hobbyists who set up mining rigs at home or in the office. were forced to shut down their machines, which could potentially be benefiting this data. However, not everyone intends to keep their machines powered down, as many areanalizando otras criptomonedasto continue its operations, for example by extracting Ethereum Classic , Ravecoin or the new forked version of Ethereum , ETHPow .
The move could mean that cryptocurrency cryptocurrencies are digital currencies that use cryptographic technologies to secure their operation. mining activities continue to represent a significant energy and environmental impact globally, which could in turn provoke anger among environmentalists and lawmakers around the world, who have already expressed discomfort with the activity. In this scenario, however, at leastEther the form of payment used in the operation of the distribution application platform, Ethereum.will not be to blame.
Ether becomes deflationary
Another relevant result of the merger will be the reduction in the issuance of new tokens ETH, which could eventually turn it into a deflationary currency. Ethereum has been burning destroying a certain number of digital coins to reduce their issue. This method is used to fight inflation and increase the value of cryptocurrency. All token burning transactions are recorded in the blockchain as a transaction. Therefore, anyone can verify that the coins were destroyed. through some of its transaction fees since it introduced its updated EIP-1559 last year. This burning mechanism (eliminating tokens ) takes on a new meaning withThe Merge .
According to estimates quoted by The Block a file containing information on transactions completed during a given time period. Blocks are the constituent parts of a blockchain. the rate of creation of new Ether will drop by almost 90% because the rewards for validators will be significantly lower than the rewards for PoW miners. The most conservative estimates from the researcher at Ethereum Justin Drake, estimate that the burn rate will amount to 1.5 million ETH annually. The result: ETH supply could become deflationary by 1.5% a year, it noted Bybit in a shared analysis to DiarioBitcoin .
Optimismo por The Merge
Expectations around the change in these supply-demand dynamics, as well as the broader enthusiasm forThe Mergehad prompted speculation of a price increase forEtherafter the event. However, the second largest cryptocurrency received the merger with high volatility a statistical measure of dispersion of returns, measured by using the standard deviation or variance between returns from that same security or market index. and, unlike expected, bearish action.
ETH plummeted a few hours after the update, losing its USD $1,500 level. . About 30 days ago, the currency currency is a medium of exchange that defines value. managed to trade at around USD $2,000, amid the advances ofThe Merge. The figure, however, is considerably lower than its all-time high of close refers to the closing price; similar to the same term used in stock trading. to $4,000 reached in November.
Despite this downtrend, which extends across all other cryptocurrencies as well and has characterized the cryptomarket for much of 2022,The Mergecontinues to be perceived as a long-term bullish catalyst. One of the reasons behind this sort of general optimism is the shift to a deflationary economy, as well as expectations of a boost in adoption.
More institutional adoption?
In its analysis for Bybit technical writer, Nathan Thompson, addressed speculation about a larger institutional demand de Ethereum after the merger. For some time now, institutional investors have been showing increasing interest in the new asset class, primarily seeking exposure to Bitcoin .
Some observers seem to agree that the major technological milestone of the Ethereum could attract more investors to the ecosystem. One possibility is that, because of its now green focus, ETH could attract more capital capital is most commonly defined as the large sum of money you would use to invest. from ESG investors, those who only invest investing is when you put money in a financial scheme with the intent of making a gain. in companies and industries that achieve certain environmental, social or corporate governance in the world of cryptocurrencies, governance is defined as the people or organizations that have decision-making powers regarding the project. goals. The shift could also spur a further impetus towards Web3 as suggested by the co-founder of Polygon Sandeep Nailwal, during an interview for CoinDesk TV :
It’s the first big step in a series of a myriad of steps that could attract a billion users to Web3 . In the Web 3 journey, [it’s] one of the biggest inflection points to make it more pervasive.
Businesses or users with environmental concerns now have fewer excuses to enter NFTs non-fungible token, a unique non-interchangeable piece of digital content that is stored on a distributed ledger (blockchain). and Web3, while the new deflationary nature of ETH could also prove seductive. Beyond these characteristics, the prospect of having achieved a technological breakthrough of such magnitude (the metaphor of a car switching from gasoline to electricity in full motion has become popular) is a potential reason why investors may be attracted to the new technology.
No, the rates will not be cheaper
Despite all the advances it brings The MergeIt should be noted that the update will not solve all of the problems with the Ethereum . Indeed, significant challenges remain, including high transaction fees and the relatively slow speed of the network. While the structural changes brought about by the upgrade could eventually help to reduce the operating costs of Ethereum This will not happen immediately, as the following points out David Z. Morris un opinion piece .
As a result, the so-called competitors of Ethereum as Solana, Avalanche y Cardano could continue to gain momentum. To the Layer 2 chains of Ethereum , Optimism, Polygon y Arbitrum to name a few, also have a long a situation where you buy a cryptocurrency with the expectation of selling it at a higher price for profit later. time to live and can continue to evolve as scalability remains an open issue for Ethereum .
Next steps: a promising future
The path of Ethereum is far from over with the merger. As the platform a place to buy, sell and store cryptocurrency continues to face challenges, its developers are striving to chart an ambitious roadmap a roadmap is a high-level visual summary that helps map out the vision as well as the direction of a specific product. whose ultimate goal is the very vision of the project: to enable countless users to build decentralized decentralization refers to the property of a system in which nodes or actors work in concert in a distributed fashion to achieve a common goal. applications from a scalable, secure, and decentralized blockchain.
Over the next several months – and possibly years – it is expected that Ethereum continue a phased upgrade which will eventually introduce the fragmentation or sharding sharding is a scaling approach that enables splitting of blockchain states into partitions containing states and transaction history, so that each shard can be processed in parallel. The process seeks to break down the network infrastructure into smaller parts, making it easier to store and distribute data, which will make the network more scalable.
However, before fragmentation, Ethereum will undergo a change that Buterin has described as “ proto-danksharding “. That phase, as he explains The Block The data that can be stored in a block will increase the amount of data that can be stored in the Ethereum and will make transaction costs in layer 2 chains 100 times cheaper.
The founder previewed some of the plans during the event. EthCC in July, in which he said that, if he followed that route, Ethereum could be capable of processing up to 100,000 transactions per second (TPS). In comparison, the network can process 15-20 TPS today. The sharding has been a part of Buterin’s vision of Ethereum for at least 5 years, as the media recalls.
Undoubtedly to Ethereum still has a long way to go and after his latest breakthrough he has a promising future ahead of him. During a celebration ofThe Mergeon Thursday, Buterin described the merger as “ the first step in the great Ethereum journey “. He was optimistic:
To me, the merger simply symbolizes the difference between Ethereum’s early stage and the Ethereum we’ve always wanted… to become. So let’s build all the other parts of this ecosystem and turn Ethereum into what we want it to be.
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Article by Hannah Estefania Perez / DiarioBitcoin
Imagen de Unsplash edited in Canva