That’s it, Ethereum is taking a decisive step, on the verge of realizing what no blockchain has been able to do so far: changing the consensus method in full. For some, this is akin to “replacing an airplane’s engine in flight,” given the importance of the task that the blockchain development teams have taken on. Here are the key things you need to know about what this transition called “Confluence” entails, which takes place between September 13th and 15th.
Switch to Proof of Stake
Currently, the Ethereum network operates in proof-of-work (PoW) mode, the consensus method on which, in particular, Bitcoin is based. In this operation, miners spin video cards that compete against each other to find a combination of numbers. The first machine that finds this combination gets the right to check the block with the transactions entered into it and the cash reward. This action secures the network.
In the new configuration, the network will turn into proof of stake. This time, validators will be responsible for validating the blocks. To make sure that everyone is playing by the rules of the game, validators will have to immobilize 32 of their ethers, the native cryptocurrency of Ethereum, on the network. A whistleblowing system is then put in place to make sure everyone is doing a good job. In case of violation of the rules, the stored ethers may be confiscated or destroyed.
This change will be a true proof-of-stake test because never before has an Ethereum-sized blockchain that manages nearly 400 billion assets adopted it. The question will be whether the incentives will be sufficient to keep validators to keep the network secure in the long run. Moreover, ethers locked on the blockchain will still be locked a few months after the merger to avoid an immediate decrease in network security.
It should be noted that changing the consensus will not change the transaction fees, which to this day remains one of the most important obstacles to the wider adoption of Ethereum. This is the development of “layer 2” solutions, an additional layer of transactions in order to reduce congestion in the main network, which will have to reduce them.
Important for the image
Since December 2020 and the launch of the Beacon chain, a currently off-chain blockchain on Ethereum that operates in proof-of-stake mode and will therefore replace one that operates in proof-of-work mode, this big consensus change has been delayed many times. due to the complexity of its implementation. According to the original roadmap, the transition to proof of stake was even planned for 2017.
While the Ethereum ecosystem happily pushes for this “unprecedented” change, it comes with many technical risks. Risks taken by network icon Vitalik Buterin. This change in consensus will allow Ethereum to avoid the currently recurring energy consumption debate that is plaguing the crypto world.
Unlike Bitcoin, Ethereum can be mined by individuals, Vitalik Buterin, from the very birth of the network, does not want his mining to become industrial, as has been happening with Bitcoin since 2013. Even with the price drop, Ether remains among the most profitable cryptocurrencies. to my. As a result, more and more machines are connected to the network, resulting in its power consumption of about 100 terawatt-hours per year, which contributes to the shortage of video cards in the gaming world. Through this development, Ethereum can hope to see many institutional players join the network at a time when CSR criteria are becoming increasingly important.
Decentralization in question
Since December 2020, about 14 million Ether have been deposited on the network from almost 420,000 addresses. But an entry ticket of 32 Ether, about 55,000 euros at the current price, mechanically prevents anyone from being a validator on the network. Especially since all the parameters were collected by the Ethereum teams to give their cryptocurrency every chance to increase its value in the coming years. This can make the entry cost to become a validator even more prohibitive. Therefore, there is a risk of the emergence of validation giants that threaten the decentralization of the blockchain.
Resistance from some miners
The biggest losers from this change in consensus have clearly been the miners who have helped secure the network since it launched in 2015. and promises a much larger number of transactions than Ethereum in the future.
In order to continue using their hardware, the envisaged solution is to fork Ethereum, i.e. create a chain parallel to the network. An event that has already happened many times in the crypto ecosystem. While heavyweights in the crypto world like Aave or Chainlink have already announced that they will not accept ETHW (proof-of-work mining ether), while Binance, the world’s most popular crypto exchange platform, has announced that it will support a hypothetical fork