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What Will the Ethereum Upgrade Mean for the Industry?
The Ethereum Foundation made headlines earlier this year when it announced that the Ethereum Blockchain would transition from proof-of-work to proof-of-stake. Months later, the blockchain has completed its London update, and the Ethereum 2.0 upgrade, which will include the new proof-of-stake system, is scheduled to be finished in October. Ethereum and crypto enthusiasts, in general, have been excitedly anticipating this upgrade, and crypto-focused media has been covering all of the events building up to it.
However, blockchains are constantly changing. Why is this one getting so much attention? What will it signify for the rest of the industry once it's finished?
What is Eth 2.0?
Eth 2.0 is an Ethereum Blockchain upgrade that was announced in early 2021 but has been predicted for years. The upgrade's major goal is to address some of the Ethereum network's inherent issues, including scalability, energy consumption, and network power distribution.
The most significant change brought about by this upgrade is the switch from proof-of-work to proof-of-stake consensus. A proof-of-work consensus is one in which users must digitally validate transactions in order to create new blocks and collect cryptocurrency rewards. It is, in essence, the method by which new cryptocurrencies are developed.
The difficulty with proof-of-work techniques is that they consume a lot of energy, which inhibits certain people from joining the network. A proof-of-stake consensus, on the other hand, asks users to stake their existing tokens as validators. As a result, substantially less energy is consumed, and more people are able to readily engage in the network.
How Will It Affect the Industry?
It's interesting looking at what ETH 2.0 means for the rest of the blockchain industry now that it's on the horizon. First and foremost, we must evaluate the impact on energy usage as well as the popularity of proof-of-stake techniques. PoS is widely employed in the business, with prominent blockchains like Bitcoin and Ethereum employing it. It is, however, divisive, particularly in terms of energy use.
Tesla had previously announced the cancellation of its prior plans to use bitcoin as a form of payment for its products around the same time as Eth 2.0 was revealed, citing environmental concerns. Indeed, cryptocurrency mining has been discovered to consume as much energy as entire countries in a single year, with the PoS consensus playing a major role in this.
The Ethereum Foundation stated in its release that the upgrade would lower the amount of energy needed by the blockchain by up to 99%. This transition and energy savings by a blockchain as large as Ethereum (the second most popular cryptocurrency behind bitcoin) may put pressure on other blockchains to follow suit.
After all, how can the sector advance if it maintains its energy-intensive image? This setting will additionally emphasize network accessibility. The Ethereum blockchain will become considerably more enticing to those who do not have the finances or desire to invest thousands of dollars in mining equipment.
This, combined with a renewed focus on scalability and security, means that the Ethereum network is poised to accept a large number of new users. It could end up competing with the Bitcoin network, which has no intentions to ditch its own proof-of-work consensus system anytime soon. This could be a problem because Ethereum is its strongest competitor in terms of popularity and general usage.
Finally, the most important thing that Eth 2.0 will achieve for the industry is bringing in a new era of responsible energy usage, scalability, and easy access. This announcement was highly needed at a time when the sector is under so much scrutiny. We should expect to see more blockchains adopt the proof-of-stake mechanism in the future, and the proof-of-work method may become obsolete over time due to its high energy requirements.
In a few years, this shift within the industry will be credited specifically to the Ethereum 2.0 upgrade.
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