In recent months, the world of crypto and digital currencies has been dealing a bit with one topic – changing and upgrading the Ethereum infrastructure that will be launched in the coming days. Eldad Rodrigue, VP of Product at Crypto Trading Co Bits of Gold The move explains the effort to create a faster, more reliable and safer high-speed network that will also save huge amounts of energy invested today. Everything you ever wanted to know about Ethereum 2.0 is here.
Before talking about changing and upgrading infrastructure. What is Ethereum?
Ethereum is a decentralized digital currency with a unique feature – on the Ethereum blockchain platform, you can write and run software code. As with the internet infrastructure, you can transfer video calls, play games and shop online, similarly you can run a wide range of software and applications on the ethereum platform. Some of these applications have already made a huge difference in the world, and this is the most well-known of allNFT, a software protocol that enables the identification of digital artworks. Other well-known uses are digital applications that attempt to mimic banking operations such as deposits and loans, issuing shares, etc.
With all the success and penetration of digital currencies – is there a problem with the existing Ethereum system?
It’s not a problem, it’s more of a development. Digital currencies like bitcoin and ethereum started with one invention – an algorithm that allows a common ledger that everyone agrees on across many computers. But this algorithm consumes less power because it is designed to profit from investing computing power and electricity into its security rather than hacking it. Hundreds of thousands of computers around the world invest enormous amounts of energy in securing these networks. Vitalik Buterin, the inventor of Ethereum, thought there was a possibility of doing this in a simple way, so they went for an innovation that has already been postponed dozens of times – and will change the way the network works.
So what exactly is innovation we are talking about?
Now the heart of the system is about to be replaced. Algorithms maintained by the network via proof of work (“Proof of work“) retired, shall be taken as proof of holding his position, (Proof of stake). The investment of computing power used so far is actually replaced by the method of using a guarantee. That is, every operation performed on the network has a guarantor. This guarantor invests 32 Ethereum (currently worth about $50,000) and gets paid for every action he approves. But there is a catch. If he tries to cheat or is not available to confirm an action – the system may not only stop his payment but may even confiscate part or all of his guarantee.
Not everyone is sure that everything will go smoothly – first of all, this is an old idea, its origin dates back to the 90s of the last century. Second, there is the question of the finality of transfers in the network – if a transfer is cancelled, what happens to other transfers and other programs that have followed it? But the bigger question is related to decentralization – will it disappear? Will Ethereum become another bank that blocks some transactions and blocks others, and if so, what is it for? After all, centralized fiat currencies are easier and more profitable to use, and decentralization is the exciting news in this economy.
What will change in Ethereum 2.0?
For traders themselves, nothing will change. After a short transition period, the network, if all goes to plan, will return to normal operation. However, many changes will be applied under the hood – the rate of transactions will increase, energy will be saved, and the platform will undergo significant innovation, which will allow it to continue to grow. On a global scale, if it succeeds, and if it’s huge, we’ll see question marks rise about the power consumption of other currencies, and development teams will be forced to make difficult decisions.
And when will all this happen?
The Ethereum Foundation (The Ethereum Foundation) announced on its official blog that the first part of the renovation began on September 6th, and that the second and possibly more central part will take place between the 10th and 20th of the same month. Currently the launch date is 15.9. Ethereum has been a complex project since its launch and the main concern is unexpected bugs.
How will this affect Bitcoin?
No one knows how to predict the rate of digital currencies in the short and medium term. However, it’s a difficult question – will the upgrade go as planned? Will there be trouble? If there are glitches, how much of an impact will they have? Bitcoin is a conservative society that sees value in its ability to maintain a decentralized system that is not reliable and minimal. The Ethereum community makes more business-like decisions from time to time, while the Bitcoin community sees the concept behind the currency as a core value, decentralization, reliability, and immunity from censorship. These are differences in attitudes that remain with communities throughout the years.
And how does all this affect us?
Like the infrastructure of the Internet network, when the infrastructure of digital currencies, one of the central ones, Ethereum, is easy to use and convenient, applications will flourish. Today we see systems DeFi Internet Protocol allows you to borrow, make investments, trade, and more. I predict that these uses will increase greatly, along with the accessibility of each of us to many, very cheap financial services.
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