Major upgrades to the Ethereum network could help the cryptocurrency rise even higher. Here is a roadmap for the changes. | Currency News | Financial and business news
- Ether has reached record levels, in part because of the growing interest in the Ethereum network.
- But major changes are coming to the blockchain, which some investors believe could send ether higher.
- The developers are reviewing how the fee works and plan to make it much more environmentally friendly.
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Ether – the second largest cryptocurrency in the world – hit record highs above $ 3,600 from the week to Friday and topped bitcoin with returns of around 370% year-to-date.
Analysts said a key catalyst has been the growing interest of big players such as the European Investment Bank in the Ethereum blockchain network, on which the Ether operates.
Investors were drawn to the possibility of building decentralized financial contracts on the system and other applications such as non-fungible tokens, or NFTs.
But Ethereum’s upcoming changes that aim to make the network bigger and more sustainable are also exciting investors, as they could push up the price of ether even further.
Insider spoke to Ben Edgington, who works on upgrades for development company ConsenSys. He presented the roadmap for the changes.
Upgrading ‘London’ will start destroying Ether Coins
After fine-tuning how transaction payments work in April, Ethereum developers are gearing up for a major overhaul of the fee system. The changes are due in mid-July, according to Edgington.
In the current system, users send what is known as a gas tax to miners as payment for transactions to be verified, in a sort of auction. Miners transact and create cryptocurrencies using computing power to solve puzzles on the network.
But when the network is busy – as it gets more and more busy – the auction system means that users have to bid larger amounts and estimate the appropriate fees, resulting in volatility and sharp price spikes. price.
To resolve the issue, the Ethereum developers agreed to a major change, known as EIP-1559 in crypto jargon, which is expected to take place during an event called the “London hard fork”.
Under the new system, gas charges will be replaced by mandatory and automatically determined base charges, which would fluctuate depending on network congestion. Users will have the option to tip minors if they need transactions to be completed quickly.
But the most exciting part for many investors is that the grid will start to destroy or “burn” some of the gas costs.
Edgington says, “Potentially, more ether will be burnt which will be generated for the miners.” He added that this could lower the supply of ether over time, “which in effect trumps bitcoin’s monetary policy, which is fixed.”
An analyst said earlier this year that the burning fees could lay the groundwork for “explosive growth” in the price of ether.
Ethereum 2.0 aims to increase network size and sustainability
The developers are very excited about the significant changes collectively known as Ethereum 2.0, which aim to make the network bigger and more sustainable.
First on the Ethereum 2.0 road, this is what the developers are calling Fusion: a complete change in the underlying mechanics of the network, which Edgington says will hopefully be completed by the end of 2021, or early 2022.
Currently, computers compete with each other to solve complex puzzles to check the network and extract the ether in what is called a “proof of work” system.
This makes the network secure, as it would take huge and expensive amounts of computing power and energy to hack – but it’s very bad for the environment.
Ethereum will move to a “proof of stake” system instead. This means people can validate transactions and mine them based on how many coins they hold and are willing to offer as some sort of down payment, Edgington said.
Each user who wants to verify trades – and thus earn rewards – must set up a large wager, say 32 Ether valued at over $ 120,000.
The idea is that anyone who wants to attack the network should earn enough Ether to pay more than the collective value of all the stakes to start modifying the blockchain in damaging ways.
Edgington says there’s already around $ 10 billion on the proof-of-stake network, known as the Beacon Chain, which the developers launched in December.
Ethereum developers are working hard to move through the network to the new system – The Merge – but it is not without risks.
A developer described the process of “replacing an aircraft engine while it is still in flight”. But they added: “The code used will have been exhaustively verified, combat tested and rechecked.”
‘Sharding’ aims to expand the network
Yet Edgington points out that “moving to proof of stake is not a scalability solution.”
To try and expand Ethereum so that more applications such as NFTs or decentralized funding contracts can be built there, developers will create new networks in a process known as sharding.
“It’s like running 64 blockchains in parallel with the beacon chain to increase capacity,” says Edgington.
Simply put, creating more blockchain systems and linking them together by connecting them to the main beacon chain should expand the overall network and make it more efficient, as opposed to the current system where everything is done on a large network.
“I hope that within a year of providing proof of stake, we will have provided the partitioning solution,” says Edgington. “But no one makes a strict project plan or deadline for it. He’s ready when he’s ready.”