Do you know that the second biggest cryptocurrency, Ethereum, could turn more energy-efficient by mid-September? Ethereum network has been on a very long year path to switch its proof-of-work blockchain into an efficient proof-of-stake system. Now, the Ethereum developers suggest a date to switch to Ethereum Proof of Stake, but it is not yet final. However, from a credible source, the switch may happen in mid-September.
This switch may change the system which connects the Ether crypto. It is the second most popular cryptocurrency next to bitcoin in terms of value, the number of other blockchains, and distributed apps connecting to the network in many ways. Plenty of tests have been conducted to find the potential issues. A completed merge and the final test net are ready to get into the live network. Clear all your doubt by contacting the Ethereum customer service team.
What Is Ethereum Proof of Stake and Proof of Work?
The significant consensus mechanisms of cryptocurrencies are proof of work and proof of stake. They are used to verify new transactions, add them to the blockchain, and develop new tokens. Proof of work is the older mechanism accessed by Bitcoin, Ethereum 1.0, and others. The newer consensus mechanism called proof of stake powers Ethereum 2.0, Tezos, Cardano, and other newer cryptos.
Proof of work and mining are similar ideas. The primary reason it’s called proof of work is that the network demands a huge amount of processing power. This blockchain is secured and verified by virtual miners throughout the world competing to be the first to solve the math puzzle. The winner usually gets updated on the blockchain with the latest verified transactions and rewards by the network with the predetermined amount of cryptocurrency.
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It has some powerful benefits for valuable cryptos such as bitcoin. It is a robust and proven way of maintaining a secure decentralized blockchain. When the crypto value grows, more miners are encouraged to join the network and increase its security and power. Due to the amount of processing power involved, it becomes impractical for a group or individual to interfere with the crypto’s blockchain.
Other blockchains already access proof of stake. It can tremendously minimize the amount of energy the miners access to lock up crypto they already own as collateral to validate the transactions. If their calculations do not add up, they will face the penalty of losing those tokens. From the beginning, Ethereum’s developers knew that proof of work would have certain limitations in scalability that needed to be overcome.
Ethereum-powdered decentralized finance protocols have risen in popularity. The blockchain has struggled to keep up and then causing fees to spike. While the bitcoin blockchain processes incoming and outgoing bitcoin transactions, Ethereum’s blockchain needs to process a vast array of Defi transactions, NFT minting, and smart contracts. Ethereum’s upgraded version will employ fewer resources and a faster intensive consensus mechanism called proof of stake.
Its goal is to maximize efficiency and speed while lowering fees. In this process, the network participant gets selected to add the latest transactions to the blockchain and then earn some crypto in exchange. The Ethereum platform is switching to proof of stake, which will happen soon. So, it becomes necessary to know about the working of proof of work in the Ethereum blockchain.
How Does Ethereum Proof of Stake Work?
Proof of stake was proposed firstly on an online forum called BitcoinTalk in 2011. It was considered the reliable mechanism for securing Ethereum from the start. In 2013, it was described as the new blockchain. However, in 2014, developing such a system was utterly non-trivial.
On the other hand, some consider that it was impossible. Therefore, Ethereum launched with the proof of work model instead. It also starts to develop the proof of stake algorithm. This mechanism does away with miners and replaces them with validators. It makes you invest in the system’s native coins rather than in energy-intensive computer farms.
To become a validator and win the block rewards, it is mandatory to lock up or stake your tokens in the smart contract. When you send the crypto to the smart contract’s wallet address, the contract holds that currency. It is similar to depositing money in a vault. Ethereum is gradually moving in the proof of stake system. So, you can put about 32 ether to become a validator. If you do not wish to spare this change, join the staking service.
Ethereum’s proponents start to claim the benefits of proof of stake over the proof of work as it is the economic incentive to play according to the rules. When the node validates bad transactions/blocks, the validators confront slashing. Proponents claim that Ethereum Proof of Stake is more highly secure than proof of work. It is necessary to have more than half of the computing power in the network to attack the proof of work chain.
Conversely, you should control more than half of the coins in the system with proof of stake. It is challenging and impossible to achieve with proof of work. The proof of stake system of Ethereum is already being tested on the Beacon Chain on December 2020. So far, millions of Ethereum have been staked there. The primary plan is to merge it with the main Ethereum chain in the upcoming days.
After successful merging, Ethereum will introduce sharding, a reliable method of breaking down a single Ethereum blockchain into 64 separate chains. The beacon chain will coordinate all these chains. Since shard chains allow for parallel processing, the network can scale and even support several users compared to before. Many people witness the addition of shard chains as the Ethereum 2.0 upgrade’s official completion. However, it is not scheduled to occur until 2023.
Is It Necessary To Do Anything With This Ethereum Merge?
No! You do not do anything with the Ethereum switching to the proof of stake. This merge would not change anything about Ethereum’s history. You are still being able to head to the block explorers to obtain the complete record of the Ethereum blockchain. As long as everything goes perfectly, you would need to lift a finger.
However, the active ETH trader on centralized exchanges will notice a temporary interruption in depositing and withdrawals. As this interruption is normal, you do not need to worry about anything unnecessarily. Reliable crypto exchanges, including Coinbase, have already started to send notices to the customers to ensure they are aware.
Ethereum miners will get out of the job after this big switch. You need to mine somewhere else to grab the benefits of Ethereum. Whenever you plan to stake Ethereum to the beacon chain, you can withdraw your Ethereum shortly after the merge.
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What Can You Expect After The Ethereum Merge?
As soon as the Ethereum network switches to proof of stake, you will witness the increase in speed and capacity of the network due to the launch of shard chains. These will expand the Ethereum network to 64 blockchains. The Ethereum Proof of Stake switch must happen first, as these shard chains rely on the staking.
The requirement for scaling via shard chains has been offset somewhat by the layer-2 scaling solutions. It transits ETH and ERC-20 tokens to another blockchain temporarily. Then, it completes the computational work for a fraction of the cost and at a lower price. Shards will coexist with the layer-2 technologies and render endless scalability.