Ethereum 2.0 - The next Generation
By Ofek B. | 8-04-2022
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In summary
Since its launch, Ethereum has generated tremendous profits for its investors. It provided a basis for building decentralized projects on its network and has taken an important place in the technological and business world, even beyond the crypto market. Following the demand and the high usage of its network, it must keep evolving. Will Ethereum 2.0 be the perfect product everyone expects? Only time will tell.
Ethereum, the second largest cryptocurrency in value, is the network for thousands of NFTs, gaming, and DeFi projects. At its peak in November of 2021, the value of its native coin, ETH, reached $4,800. Ethereum’s upcoming upgrade is one of the most talked about subjects in the crypto space. The upgrade, known as Ethereum 2.0, or Ethereum Merging, is expected to be launched in Q3 of 2022.
What will the upgrade improve?
Scalability - Today, Ethereum can generate approximately 30 transactions per second, which is a somewhat limited number compared to other blockchain networks and various payment systems. The network should reach about 100,000 transactions per second as part of the upcoming upgrade.
Gas fees - One of the most painful disadvantages of Ethereum is the high cost of gas fees.
The major update in this upgrade is a change in the mechanism of validating transactions. Today, the Ethereum network is based on proof of work. In this method, computer power is used to verify transactions when the participants compete for ETH rewards. The computers solve cryptographic puzzles to confirm all network transactions—a process commonly known as mining.
In Ethereum 2.0, the network will be based on proof of stake, which works by users staking (locking) their crypto in pools that compete with other pools for the right to be the verifiers. The rewards distribution is relative to the amount of crypto each participant stakes, and is distributed only to the winning pool. The more coins you stake, the more significant rewards you will receive.
Switching from
proof of work
to
proof of stake
There have been cases where the cost of fees has suppressed the asset’s cost by a large margin. The transition to PoS will remedy this.
Eco-friendly - Mining requires a lot of electricity and it’s unhealthy for the environment. Therefore, switching to PoS is an ideal solution to the problem since this mechanism requires minimal electricity consumption.
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