News hardware Ethereum: What will happen to the second largest cryptocurrency after Bitcoin’s fall?
While Bitcoin has wreaked havoc on the entire cryptocurrency market after 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, miners’ favorite crypto may well recover without waiting for Bitcoin.
Ethereum, what is it?
In 2013, Vitalik Buterin, former World Of Warcraft player emeritus, wanted to create a decentralized exchange protocol to compete with Bitcoin. Then only 21 years old, the young Russian arrived to pick up 31,591 bitcoins, 18 million euros at the time. With this funding, he will be able to launch Ethereum for the first time in 2015.
Main revolution behind Ethereum: ERC-20. ERC-20 is used in smart contracts and 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 manner. Specifically, Vitalik Buterin used the blockchain (technology behind Bitcoin) to enable Ethereum to offer multiple applications to web players.
For example, many sectors have been able to use Ethereum smart contracts to issue their own token.
This is the case with crypto startups, which were the first to use Ethereum to issue 2.0 shares in the form of virtual tokens to fund their project through crowdfunding. These virtual tokens are often intended to serve a particular purpose. For example, the Shiba Inu token is the 16th largest capitalization in the crypto market.
Ethereum smart contracts are also at the beginning of the “CryptoArt” universe with NFTs. Indeed, cryptocurrency and its network are at the root 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-functioning (NFT), that is, each token has a unique value and therefore cannot be replaced by another token, unlike a cryptocurrency.
These multiple features (and others…) make Ethereum the most functional virtual currency in the Web3 era. Although it is the first in its sector, there are still many points to be improved. The Ethereum network overheats quite quickly and therefore charges for user transactions. In addition, just like Bitcoin, the network is energy-intensive because of the POW (Proof of work) protocol.
However, this should be resolved by the end of this year…
The Merger: Ethereum 2.0 Coming Soon?
While Bitcoin struggles to rise again with a 7% rise in the past seven days, Ethereum has printed a 28% rise. This monumental rise has no specific reason, nevertheless the context is quite favorable for Ethereum. Indeed, The Merge, the highly anticipated event of 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 common 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 because it requires a lot of electricity to run the machines. Bitcoin, for example, 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 the calculation with another based on the active use of his treasury. Therefore, it allows holders of the asset in question (in this case Ethereum) to use their capital, rather than a graphics card, for block validation.
This is especially 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, as the Proof-of-Stake (PoS) consensus is rightly considered more environmentally friendly.
Also, this transition to the POS should improve the performance of the network so that it is more sustainable by supporting the waves of transactions as best as possible. During the NFT bubble, the network generated about one hundred euros for each transaction for its users.
In addition, the gaming community will also welcome this transition to proof-of-stake, as it will eliminate the need for miners to use a plethora of graphics cards to generate returns in ether.