The uprising has been prophesied since 2017 and finally, the potential of Ethereum is being used to its fullest. This is just the beginning with NFT, Defi and Dapps Ethereum has the potential to topple the likes of Microsoft and Apple
Many of us fear that we are too late and the train has already left the station. To all the muggles and wizards fear not. I am not a wizard or an oracle but I will prophesize a new era.
An era of Ethereum and other altcoins.
Let's understand why are we seeing a rally in Ethereum first.
A Brief History
Launched in 2015, Ethereum is an open-source, blockchain-based, decentralized software platform used for its own cryptocurrency, ether. It enables smart contracts and Distributed Applications (DApps) to be built and run without any downtime, fraud, control, or interference from a third party.
In 2016, Ethereum was split into two separate blockchains, Ethereum, and Ethereum Classic, after a malicious actor stole more than $50 million worth of funds, which had been raised on the DAO, a set of smart contracts originating from Ethereum’s software platform. The new Ethereum was a hard fork from the original software intended to protect against further malware attacks.
Ethereum Berlin Fork
Abbreviated as “EIPs,” anyone can submit an Ethereum Improvement Proposal, and those accepted by the community get implemented into the blockchain.
The Berlin fork involves several complex technicalities, but it had been anticipated across the community nonetheless.
The first was EIP-2565, which lowers the gas cost for modular exponentiation, otherwise known as the “ModExp” function. The fork also included EIP-2929, which Vitalik Buterin and Martin Swende put forward. EIP-2929 increases gas costs for state access operations (otherwise known as “opcodes”) and adds security improvements to the blockchain. The update also introduced EIP-2718 and EIP-2930, which involve defining a new transaction type for future transactions and adding a new transaction type that includes access lists.
Gas costs refer to how much it costs to execute a smart contract on the network, whereas gas prices, refer to how much ETH you are willing to pay per unit of gas. Transaction fees are a product of the two.
Many key Ethereum supporters took to Twitter to celebrate the milestone as it happened this morning.
Now let's look at the future (not a distant one )
EIP-1559 London Fork
Berlin’s completion takes Ethereum one step closer to London, the hard fork that will include its long-awaited EIP-1559 update. Tim Beiko, the coordinator for the various implementers and researchers working on EIP-1559, explained to Crypto Briefing that EIP-2929 and EIP-2718 are essential “prerequisites” in the lead-up to the update.
The upgrade, EIP-1559, is scheduled to go live in Ethereum’s “London” hard fork this July.
EIP-1559 overhauls the way users pay Ethereum’s transaction fees. Currently, fees are paid to miners for processing transactions.
The cost of those fees depends on the supply of miners and users’ demand for them. If there’s a bottleneck on the network, miners can charge rates of over $20 per transaction.
The miners’ resistance
The miners are less pleased about this. Of course — they are missing out on the currently abundant income from the fee market.
On the website StopEIP1559.org, a community of pools is protesting against the EIP. While the large, cross-blockchain pools F2Pool, Poolin, Binance, Antpool, BTC.com, and ViaBTC support the EIP, they are not yet against it much smaller, and Ethereum-focused pools are protesting. Among them are the two most important pools for Ethereum, Spark, and Ethermine, which together account for more than 40 percent of the hashrate.
We are convinced that EIP-1559 puts the future of Ethereum at risk,” Ethermine commented on Twitter. “The closer we get to the transition to Ethereum 2.0, the riskier such a change becomes as miners have less stake in the game.” The pool stresses that it has supported Ethereum “with its perfect imperfection since Genesis” and urges developers to find a solution that does not rely on burning fees to win miner support.
Sparkpool’s comment is more drastic: “We are miners, and we are holders. We bought our first Ether in the 2014 crowdsale.” However, burning the fees through EIP 1559 is “a redistribution of wealth from miners to holders.” This, he said, is “why so many people support it. They think the less Ether, the higher the price, therefore they will get richer.” However, for the pool, this is a “tyranny of the majority in the name of a better UX.” It is “theft.” Yet the pool loves Ether and BTC precisely “because it gives us perfect property rights.” EIP 1559 breaks this. “It saddens us to see so many people only care about the price.”
Pools ask miners to join pools that oppose EIP 1559, which would be the rational decision for miners. Wouldn’t it?
Blockchain analyst Hasu sees it differently. For miners, he says, “the best outcome is just to accept EIP-1559.” For Ethereum, PoW mining will be around for at least another 18 months (before ETH2.0 switches to staking). Hence, miners have a lot to lose by preventing EIP-1559, for example, by attacking Ethereum through double-spending and censorship. In doing so, however, they would be cutting their own flesh.
Moreover, miners may earn more money after EIP-1559, not less. If the EIP makes Ethereum better — and scarcer — and thus increases the value of the flat block reward of 2 Ether, the miners might actually be better off than before.
EIP-1559 would replace the supply/demand auction-style system in place today with a standard rate across the network. The fee, called “BASEFEE,” would rise when the market is busy and fall when it’s quiet.
The crucial difference is that the fee is set by the network and altered by burning ETH. EIP-1559 means that miners don’t set the rates; the network does. And the transaction fees don’t go to miners; they’re burned.
Ethereum 2.0, also known as Eth2 or “Serenity”, is an upgrade to the Ethereum blockchain. The upgrade aims to enhance the speed, efficiency, and scalability of the Ethereum network so that it can process more transactions and ease bottlenecks.
Eth2.0 will reduce energy consumption, allow the network to process more transactions, and increase security. The launch of Ethereum 2.0 is a significant step compared to past upgrades due to the implementation of a Proof of Stake consensus mechanism, moving the network away from its existing Proof of Work architecture.
Proof of Work
Ethereum’s current architecture is maintained by a Proof of Work (PoW) consensus mechanism. Proof of Work is the architecture used for the most utilized blockchains, including Bitcoin. In Proof of Work, miners run nodes and expend computational energy to solve complex mathematical problems in a competition to mine the next block.
The time and money that miners need to run hardware and expend electricity on PoW chains are validated by block rewards, which are distributed to miners who successfully mine a block into existence. PoW chains are extremely secure; the combined computational power required for an individual to compromise a well-established PoW blockchain like Bitcoin or Ethereum would cost an extraordinary amount of money.
Disadvantages of PoW
PoW blockchains suffer from scalability and accessibility issues.
- Scalability: Because each block is mined sequentially, and there is a finite amount of data that can be recorded in each block (a measurement known as a block size), Ethereum can only process a limited amount of information in a given amount of time. If the number of pending transactions surpasses what a block can fit, then the remaining transactions have to wait for the following block, and so on.
- Accessibility: PoW miners have been fundamental to the creation and maintenance of the surge in decentralized technologies we have witnessed in the past decade. Though PoW blockchains are functional, the barriers to entry to be a miner are quite high. An individual must purchase and set up all the necessary hardware. To earn considerable returns from block rewards, that individual also likely must live in a region with lower electricity costs.
Proof of Stake
Proof of Stake replaces the two primary components of PoW (miners & electricity) with validators and stake on Ethereum 2.0. Broadly speaking, validators replace miners as the individuals who maintain the agreed-upon state of the network and receive rewards for randomly selecting the next block of data. Unlike in PoW, in which miners expend physical energy (called hash power) by burning electricity to confirm blocks, validators in a PoS system commit 32 ETH from their account.
On Ethereum 2.0, validators will stake at least 32 ETH by depositing the funds into the official deposit contract that has been developed by the Ethereum Foundation.
Validators will download and run Ethereum 2.0 client software. While running client software, they will be randomly selected to propose and attest to blocks on the Ethereum 2.0 blockchain. Validators who correctly propose and attest to blocks will receive a reward of ETH as a percentage of their stake.
On Ethereum 2.0, if a validator fails to stay online and execute their share of computational responsibilities, their block reward will moderately decrease to incentivize validators to stay online as consistently as possible. Should a validator maliciously attempt to compromise the network all or some of their 32 staked ETH will be slashed.
Phases of Launch
Eth 2.0 is a long road filled with uncertainty currently, Phase 0 of the launch has been completed.
Eth2 is set to roll out in phases, beginning with Phase 0 in 2020. Phase 0 will launch the beacon chain of the Ethereum 2.0 network. The beacon chain will implement Proof of Stake and will manage the registry of validators, who will begin attesting blocks into existence on Ethereum 2.0.
There is no firm launch date for Phase 1 yet, but it is anticipated in the year following the launch of the beacon chain in Phase 0. The primary improvement of Phase 1 is the implementation of shard chains, the scalability solution mentioned earlier in this article. For Ethereum 2.0, sharding will result in the Ethereum blockchain being partitioned into 64 separate chains (called shard chains) that run parallel to one another and interoperate seamlessly.
An important moment within Phase 1 is the merging of the original PoW Ethereum blockchain with the new PoS chain. This moment is being referred to as Phase 1.5 in the Ethereum community. Specifically, the PoW Ethereum blockchain will be brought into Ethereum 2.0 and exist as one of the 64 shard chains alongside the beacon chain, meaning there will be no break in continuity or data history.
Ethereum 2.0 has been long-anticipated and much discussed in the blockchain ecosystem. Proof of stake and sharding will bring considerable improvements to scalability, security, and accessibility. For ETH holders, Ethereum 2.0 provides a new opportunity to participate and receive rewards for maintaining the network.
JUST HODL and BUY THE DIP!
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