For those of us following the crypto space closely, ‘Ethereum 2.0’ will probably make us sigh with exasperation than cause any excitement. We have heard about this in theory so many times, heard fake dates floating around, hyped up now and then, but never saw anything really happen. But it finally seems to be happening for real.
What is Ethereum 2.0?
Ethereum 2.0 is not a new coin or a fork. This is just an upgrade of the cryptocurrency that has been redefining the world of blockchain development. Ethereum, the world’s most popular altcoin, is shifting to a Proof of Stake (PoS) consensus from its current Proof of Work (PoW) consensus.
Ethereum and its ERC-20 Token ecosystem has been the backbone of the blockchain technology boom in recent years. If you roll back a few years, NFTs weren’t popular, practical applications for blockchain projects were non-existent, all we talked about was crypto-exchange.
Ethereum in the last few years have enabled blockchain businesses to flourish and has kind of been the reason behind Web3 becoming a reality. The top NFT marketplaces are run on the Ethereum blockchain, as are many other hugely successful blockchain startups.
However, the one thing that has been plaguing the industry is the extremely high transaction costs also known as Gas Fees. It went to an extent where the Gas fees was as high as, if not more than the actual value of the transaction. This clearly demotivated users who were doing smaller transactions and those who are considerably new to the crypto space.
What is expected with the switch to PoS consensus is the scaling of Ethereum’s network, increase in transaction speed and efficiency.
Proof of Stake
The Proof of Stake consensus will rely on stakers to run nodes to validate transactions. And what is staking? It is basically depositing 32ETH to activate the software for validation.
The amount of ETH staked in the Ethereum2.0 smart contract is at an all time high of a whopping 12,789,829 ETH (According to Glassnode). That is more than 10% of the total supply in circulation and averages out to almost $23.2 Billion in Fiat, based on the prices on the date of this article’s publication.
What does this mean for the Web3 ecosystem?
Study says that Crypto Enthusiasts who use Ethereum, as compared to the closest competitor Binance Smart Chain, spend almost 4 times more. This is even in the midst of the crazy gas fees. This just shows a spotlight on Ethereum’s adoption. Imagine, this number was just among the affluent crowd and what it would mean when the blockchain becomes more affordable for everyone.
The high cost of transactions had put a break on the flourishing NFT marketplaces. With this upgrade, we can see NFTs starting to boom again like the glory days.
The investments locked in DeFi smart contracts had gone from $98.4 billion to $56 billion in February 2022. This is expected to pick up again considering Ethereum’s DeFi Dominance.
Essentially, summing it up, we will see more user inflow for existing applications, we will see new businesses entering now that the entry barrier is low and we will see the ecosystem flourish.
What is pending for ETH2.0?
As part of the first trial, Ethereum’s oldest test network ‘Ropsten’ was transitioned to Proof of Stake yesterday (8th June). However it will take time for developers to assess how successful this transition was.
If this is successful, they will be upgrading two more test networks before the merge of their main Ethereum network. However Ropsten being very similar to the mainnet, the transition that happened yesterday is of huge significance.
If the transition plans go on track, we can expect the main network merge to happen by August, 2022. But like Ethereum found Vitalik Buterin says “It is actually important to not be a catastrophist about the actual events, and also be mindful about the risks that do still remain after the events.”
As a company who is into blockchain development services, this is a very important milestone that we will be keeping a close eye on as should any business in this space or looking to enter this space. Here is to us wishing the best for all of us in the web3 ecosystem!