Ethereum, the world’s second most capitalised cryptocurrency by capital, has successfully transitioned from Proof of Work (PoW) to Proof of Stake (PoS).
The transition popularly known as “Ethereum Merge” is a historic accomplishment that will significantly reduce energy usage and also reduce gas fees attributed to the process of validation under Proof of Work.
Exactly at 7:59 this morning, Vitalik Buterin, the Co-Founder of Ethereum announced the success of the transition via his official Twitter handle.
He said “And we finalized! Happy merge all. This is a big moment for the Ethereum ecosystem. Everyone who helped make the merge happen should feel very proud today”
Up until now, ETH, the token of Ethereum, was generated by Proof of Work which alternatively means “mining,”. It is an energy-intensive process by which individuals directed huge amounts of computer power at difficult-to-solve puzzles.
Additionally, generating Ethereum through Proof of Work is not just difficult but also consumes a lot of energy to power computers that race to solve complicated math equations to validate transactions.
With this transition, Ethereum will therefore be generated by individuals and entities pledging large amounts of pre-existing Ethereum.
This means that Ethereum users will need to make a pretty hefty investment upfront to authenticate transactions. However, Proof of Stake is expected to be much less energy intensive.
Before now, Ethereum claimed its carbon emission is believed to be at par with Singapore and its total energy consumption is comparable to the Netherland. This has therefore earned Ethereum some criticism, especially from environmental activists.
The merge is however expected to lower Ethereum’s carbon footprint by over 99%, which could make the platform more attractive to environmentally conscious investors.
Ethereum was conceived in 2013 and launched in 2015 by a programmer named Vitalik Buterin and a host of others which include Charles Hoskinson (Founder of Cardano Network), Anthony Di Lorio and Joseph Lubin. It has thereafter grown to become the second biggest cryptocurrency after Bitcoin.
Ethereum Merge: Ethereum Appreciates by 4% Ahead of Merge
Ethereum is scheduled to undergo a merge that would reshape the future of the digital asset from a project powered by miners through a process known as Proof of Work (PoW) to Proof of Stake (PoS) which is widely presumed to consume lower energy and subsequently, lower gas fees.
With $198.971 billion market capitalisation and 400 decentralised applications, the world’s largest protocol could be exposed to certain level of risks not anticipated in its planning stage given its current size. Therefore, investors and traders of Ethereum are generally expected to be cutting down on their exposure or holding by now ahead of September 15 planned merge.
However, on Tuesday the price of the token started appreciating. Suggesting that many retail traders looking to take advantage of the Ethereum merge have started increasing their holdings, a situation that could hurt their pockets and entire portfolio if the merge goes wrong.
Year-to-date, Ethereum has lost 54.77% of its value. However, in the last 24 hours, the coin gained $56.33 to $1,608.83 a coin.
Investors transacted Ethereum worth $2.62 billion in 1.09 million deals in the last 24 hours while the average fee paid per transaction was $1.94.
Since its inception, it has risen to an all-time high of $4,865.57 before plunging to as low as $880.93 a coin when the Luna-triggered bearish trend commenced. The total Ethereum supplied to date is 119.64 million.
Commenting on the Ethereum merge, the CEO of Bitcoin White Rock, Andy Long, said the Ethereum merge will force existing Ethereum PoW miners to seek other coins still operating with PoW to protect their investments.
“Hash rate will flow to alternative GPU PoW coins, and many miners will simply give up and try to sell off their farms of cards,” he said.
“Some miners will try to sell their High-Performance Computing (HPC) or GPU cloud services and will likely fail since there’s too much capacity chasing a limited amount of demand,” he added.
Cryptocurrency Turnover Increased by 93% in Q1 2022
According to Capital.com quarterly report, cryptocurrency turnover increased by 93 percent in the first quarter of 2022.
As shown by trading platform Capital.com, the Ether (ETH) to the United States dollar (USD) combination attracted the most traders from January to March 2022. The Dogecoin (DOGE) to USD pair was held by the most significant number of traders in 2021, according to the report. However, for the first time in the trading platform, the ETH/USD pair has seized the top spot for most traders.
The report showed that crypto turnover increased by 93 percent throughout the quarter. Despite the optimistic numbers, the report acknowledges that the increase in revenue does not reflect broader market trends because the figure was attained due to a few single-day volume surges.
The larger market is currently disinterested, according to Capital.com. The Bitcoin (BTC) slump from November to January affects retail traders’ interest in crypto, according to Capital.com’s head analyst David Jones. Crypto traders, according to the analyst, are “herd creatures” motivated by momentum.
Following a spike in investor involvement in January, the following months saw a drop. The number of digital asset traders on the platform fell by 16 percent in February. The following month, the number fell by another 10%.
On Monday, the price of ETH rose past $30,900, bringing it closer to the $2,000 barrier. Analysts cautioned, however, that despite the rebound, the prices’ upward trajectory may be less than the mid-year performance of 2021. On the other hand, some analysts believe that over the summer, the price could rise to $2,700.Meanwhile, the Ethereum Ropsten testnet is transitioning to a proof-of-stake (PoS) consensus.
Tim Beiko, an Ethereum engineer, announced that on June 8, the Ropsten testnet will combine with the new Ropsten Beacon Chain, which was deployed on Monday. Before the Ethereum mainnet migrates to PoS, two additional testnets, Goerli and Spolia, will make the switch.
Ethereum Merge: Core Developer Explains Changes to Expect
Tim Beiko, an Ethereum core developer, has given a set of recommendations and expectations for Ethereum application and protocol developers ahead of the impending merge.
Beiko advised ordinary app and protocol users to test things out to verify that nothing breaks when additional tests are run. “Run stuff, if something is unclear or broken, leave a comment,” he tweeted on Tuesday. He also urged users and developers to “pay attention and make sure you are ready” for the Merge.
The Merge is the very complex and long-awaited conversion from proof-of-work (PoW) to proof-of-stake (PoS) consensus on the Ethereum network. It will be known as the Consensus Layer at that time, and it is slated to happen around August of this year.
On numerous testnets, the focus has been on ensuring that there are no cross-client concerns and that current apps do not fail completely after the Merge. In a separate Twitter thread, Beiko noted that such issues are unlikely to arise because “99% of modifications affect the protocol layer,” while “virtually no changes are done to the application layer.”
He also stated that developers should be aware that there will be two major changes to how smart contracts function with the Merge. To begin, he reminded them that the approach for beacon randomization, which aids in the running of programs, will be altered. This was announced in an Ethereum Foundation (EF) update in November and would be required for the migration to PoS.
The second modification will be a reduction in block timings from 13 to 12 seconds per block. Smart contracts that utilize block production speed as a measure of time will run one second faster after the Merge as a result of this change.
However, Beiko exuded confidence that, despite the Merge’s delays, all potential difficulties had been condensed into a single echelon. “Aside from cross-client testing and these two edge cases, the biggest risk of disruption is in ‘tooling and infra pipelines.’”
He concluded by stating that if any further vulnerabilities occur during the extensive testing and shadow forks, the Merge would be postponed further to guarantee the network’s security: “At any point, if we find issues, we’ll obviously take the time to fix + address them before moving forward. Only then will we think about moving mainnet to proof of stake.”
On Monday, DeceDeFi instructor Korpi revealed on Twitter that Ether (ETH) staked on the Beacon Chain can no longer be unlocked without a network update after the Merge. This includes staking-related prizes assuring ETH investors who are concerned that their coins will be released and dumped to relax
He also indicated that once coins are unlocked, they would be delivered in stages rather than all at once, and that those coins are typically an investor’s “never-sell stack” that will not be sold.
On the Beacon Chain, there are presently 12.6 million ETH staked. The Beacon Chain, which began in December 2020, was one of the initial moves toward turning Ethereum a PoS network.
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