Ethereum 2.0 is on its way, a turning point for the market’s number-two cryptocurrency

Ethereum is heading into a new era as the institution of the same name has declared the “Kintsugi merge testnet” public and begins its highly anticipated update. Moving from Proof of Work to Proof of Stake could change either way for the second largest cryptocurrency in the market.

Ethereum 2.0 is one of the most anticipated updates in the cryptocurrency community. Currently, Ethereum ranks second among virtual currencies (more than 480 billion in market capitalization), and is the second most powerful cryptocurrency, Bitcoin, but its usefulness is not only monetary. Ethereum is also the most widely used blockchain for NFTs as well as for exchange platforms. While Ethereum has a number of undeniable advantages, such as the ability to store smart contracts in the blockchain and decentralized software applications, it does have a few shortcomings that the move to Ethereum 2.0 aims to address: Low processing speed (only about 20 transactions can be processed). They are performed in a second, which results in expensive transaction fees for those who are impatient) and an auction system that is still fairly basic.

Then the main drivers behind the merger are to reduce transaction costs, reduce processing time during a transaction and finally to modify this auction system towards price automation.

From proof of work to proof of stake

To do this, Ethereum will transition from blockchain mining and Proof of Work to Proof of Stake. In other words, the proof of work was based on solving difficult computations and thus the power to successfully validate blocks. Meanwhile, proof of stake is not done using computer power, but simply by validating the authenticity of the authorized user (for example, he has at least 32 ETH). The auditor cannot corrupt the system, because if they do not accept enough transactions or only accept their own, they will see their authorization revoked and may lose their wallet.

With its Kintsugi test network to enable integration, Ethereum allows decentralized application developers or users to learn about the upcoming ethereum environment. This testing phase will allow the potential problems of the system to be identified and resolved at a maximum before the actual deployment, which is planned for early 2022. The success of this transition will determine the future of Ethereum as a cryptocurrency. The community and experts are divided on this topic. Some believe that this is the emergence of the Ethereum network, while others believe that new cryptocurrencies will replace it if the transition does not go as planned.

However, Ethereum is still looking ahead to a bright future and its dominant position in many markets, such as DApps or NFTs, could allow it to resist and grow. With the creative and almost unlimited potential for the evolution of Ethereum, all eyes are on this cryptocurrency.

(Main and featured image: gopixa / IStock.com)

This story was published by AFP Relaxnews.