News hardware Ethereum: what becomes of the second largest cryptocurrency after the fall of Bitcoin?
Although Bitcoin caused damage to the entire cryptocurrency market following its fall, one cryptocurrency is showing signs of strength. Ethereum, the second largest cryptocurrency behind Bitcoin, seems determined to go it alone. With the imminent arrival of Ethereum 2.0, the favorite crypto of miners could well recover without waiting for Bitcoin.
Ethereum, what is it?
In 2013, Vitalik Buterin, former emeritus player of World Of Warcraft, set out to create a decentralized exchange protocol to compete with Bitcoin. Only 21 years old at the time, the young Russian arrived to raise 31,591 bitcoins, or 18 million euros at the time. This funding allows him to launch Ethereum for the first time in 2015.
Main revolution behind Ethereum: ERC-20. Used in smart contracts, ERC-20 is a standard that governs exchanges within the Ethereum network. These irrevocable “smart contracts” have made it possible to make and verify mutual agreements between individuals in a totally decentralized way. Concretely, Vitalik Buterin used the blockchain (technology behind Bitcoin) to allow Ethereum to offer multiple uses to web players.
Thus, many sectors have been able to use Ethereum smart contracts in order to issue their own token.
This is the case of crypto start-ups, which were the first to use Ethereum to issue 2.0 shares in the form of virtual tokens in order to finance their project in the manner of crowdfunding. These virtual tokens are often intended to serve some purpose. For example, the Shiba Inu token is the 16th largest capitalization in the crypto market.
Ethereum smart contracts are also at the genesis of the “CryptoArt” universe with NFTs. Indeed, cryptocurrency and its network are at the origin of the NFT phenomenon that we know today with the arrival of a first collection called CryptoPunks in 2017. In this case, the tokens are non-fungible (NFT), that is to say that each token has a unique value and therefore cannot be replaced by another token, unlike a cryptocurrency.
These multiple characteristics (and others…) make Ethereum the most functional virtual currency in the era of Web3. Although it is first in its sector, many points remain to be improved. The Ethereum network overheats quite quickly, therefore, it incurs fees for user transactions. In addition, the network is energy-intensive, just like Bitcoin, because of its POW (Proof of work) protocol.
However, this should be fixed at the end of this year…
The merge: Ethereum 2.0 coming soon?
While Bitcoin is struggling to rise again with an increase of 7% over the past seven days, Ethereum has printed an increase of 28%. This monumental increase has no particular reason, nevertheless the context is rather favorable for Ethereum. Indeed, The Merge, the event long awaited by the crypto community is expected in mid-September 2022.
The Merge refers to the transition of the Ethereum (ETH) blockchain from Proof-of-Work (PoW) to Proof-of-Stake (PoS). Ethereum, like other cryptos, uses a validation system to secure its network. On the market, the two most widespread are the proof of work (proof of work) and the Proof-of-stake (proof of stake).
In cryptocurrencies, proof-of-work consists of using computing power (graphics cards, processor, etc.) to secure the network and collect a reward. This validation method is considered polluting since it requires a lot of electricity to run the machines. For example, Bitcoin is based on a proof-of-work protocol.
Proof-of-stake is an alternative to proof-of-work. This one replaces the mechanism based on the strength of calculation by another, based on the active use of its treasury. Therefore, it allows holders of the asset in question (in this case Ethereum) to use their capital, instead of graphics card, in the validation of blocks.
This is particularly encouraging news for Ethereum enthusiasts who have been waiting for this announcement for almost 2 years. This transition should also make Ethereum (ETH) even more attractive compared to other cryptocurrencies since the Proof-of-Stake (PoS) consensus is rightly considered more environmentally friendly.
Also, this transition to the POS is supposed to improve the performance of the network so that it is more sustainable by supporting the waves of transactions as well as possible. Indeed, during the NFT bubble, the network generated costs of around one hundred euros to its users for each transaction.
In addition, the gaming community will also welcome this transition to proof-of-stake since, as a result, miners will no longer need an abundance of graphics cards to obtain a return in ether.