Ethereum is the second most crucial cryptocurrency globally (after Bitcoin). On August 5, 2021, the new Ethereum 2.0 update called London or EIP -1559 was launched, one of the novelties that it brings is the change in the validation process, which is carried out with work tests (Proof of Work or PoW) and now there will be tests of participation (Proof of Stake or PoS). While proofs of work have proven to be more secure, the problem is that they require more resources and power, whereas proofs of stake do not require highly advanced computer equipment.
Stages of Ethereum 2.0 implementation
The new implementation of Ethereum 2.0 comprises three phases, which will end in 2022. The first phase, called “Beacon Chain,” is based on proof of stake (Proof of Stake) which will be carried out in parallel with the proof of work (Proof of Work) to avoid incidents or data loss. The second phase will be carried out during the year 2021, which will divide the blockchain into several chains of fragments (Shard Chains); this means that the chain will be subdivided into 64 different pieces, thereby facilitating the ability to make more transactions in addition to having more excellent storage of information. The third phase will probably be executed in early 2022; having met the established forecasts, the Ethereum 1.0 and Ethereum 2.0 blockchain will be merged to completely deactivate the validation of the proofs of work (Proof of Work).
With the Ethereum’s update arrival, there will be a reduction in the number of ETH that is in circulation, in addition to other changes mentioned below:
Currently, the transaction costs in Ethereum are pretty high; this means that efforts are constantly being made to improve its technology and reduce its costs, especially if it is taken into account that transactions peaked between April and May 2021. Although the rates have dropped, the truth is that they are not yet at the levels of the year 2020. It is important to note that the popularity of the network also influences the cost per transaction since the network works as an auction system: If you want a transaction to proceed, you have to pay an additional amount (those who can pay more will have higher priority) which causes transaction costs to rise.
London EIP-1559 will bring changes that will affect how Ethereum is mined, moving from ‘proof of work’ to ‘proof of stake,’ which has sparked strong protests from miners. The important thing about this update is the “almost total” change in the Ethereum blockchain network. This new version will solve bottlenecks and high commissions; however, this will also reduce the income from mining. Due to these factors, some “opposition” can be expected from Ethereum miners, many of whom will migrate to other cryptocurrencies.
Equivalent to a triple halving?
As we saw in our previous article, many people are using the term “triple halving” to describe the three changes of Etherum (EIP-1559, Ethereum 2.0, and the change towards proof of stake), which can have similar effects to 3 individual halving of Bitcoin, which could cause the price of the cryptocurrency to increase in the medium and long term.
Changes across the Ethereum ecosystem
The most significant change will occur in the entire network ecosystem; for example, many applications, NFTs, video games, and tokens that use the Ethereum network will benefit from this change since by reducing transaction fees, operations on these platforms will increase, which will help the development and growth of these platforms.
What do you think about this topic? Do you think these changes will represent a significant impact on the acceptance of Ethereum and its appreciation?
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