Crypto

Everything you need to know about the transition to Ethereum 2.0 – Geeko

This summer, the Ethereum blockchain will radically change how it works. It will move from a proof-of-work system to a proof-of-stake system. Explanations.

This is perhaps the most anticipated event of this year by crypto investors. On September 19, the Ethereum blockchain, the most widely used “web 3.0” network on the planet, will change its method of operation from a “proof of work” system similar to that of Bitcoin to a “proof of work” system. – bid”.

Specifically, the proof-of-work system is based on a set of decentralized machines called “miners” that are responsible for solving complex block mining tasks. A complex, but above all very energy intensive process that Ethereum wants to branch out from in order to adopt a more “ecological” model.

The “proof of stake” system is radically different in nature, as it is based not on the use of miners, but on “staking pools”. Concretely, the network is no longer protected by machines, but by “pools”, Ethereum reserves stored in specific locations. If earlier miners were rewarded for their work with ETH tokens, now investors will receive rewards. To be able to participate in the program, you must either have at least 32 ETH tokens, or create a “pool” with other investors, in which case the reward will be divided among different participants.

This method not only drastically reduces the carbon footprint of the blockchain, but should also speed up transactions and significantly reduce transaction costs. During peak periods, transactions on the Ethereum network can reach record amounts and exceed 100 euros. The annual energy consumption of the Ethereum blockchain is currently the same as in a country like Finland. The move to proof-of-stake should reduce the network’s ecological footprint by 99.95%.

Bitcoin, on the other hand, should remain on the proof-of-work model, which is older, slower, but nevertheless proven in terms of network security.

“Bitcoin and Ethereum serve different purposes,” Bitcoin IRA co-founder Chris Kline told Forbes. “Bitcoin is a limited asset and Ethereum is the backbone of Web 3.0. Both have different roles.”

In recent months, several tests have already been carried out in preparation for the transition. Last June, the Ethereum network successfully passed the “Ropsten” network test. In August, a new test will take place on the Goerli network. This is the last step before the final transition. And by the way, the transition is a huge challenge, as Polygon’s VP explained. “This is a modernization of a working network with millions of users. Ethereum moves billions of capital daily and powers tens of thousands of applications. The network transition was being prepared for two years. All tests have been successfully completed, so I think they are more than ready to go.”

However, the transition poses huge challenges for Vitalik Buterin’s teams. As one of the employees of Cardano, one of the competing blockchains, recently explained to us: “The transition from Proof-of-work to Proof-of-stake is not so easy. It’s like changing four tires at 200 km/h.”

All this, of course, should affect the price of the ETH token. Approaching $1,000, the price of the token has risen sharply in recent days, approaching $1,600 again. This is an increase of almost 60% of its price within a few weeks.

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