A Guide To The Upcoming Ethereum Upgrades

Ethereum, the second-ranked digital coin, has surpassed Bitcoin with an annual return of 370% this year. Presently in the crypto market, Ethereum is trading at $2,351. According to analysis, the digital coin has made a lot of income for prominent players like the European Investment Bank, a company that has invested heavily in the Ethereum blockchain system.

Ethereum is a Very Attractive Prospect

Most investors are attracted to building financial contracts on a decentralized system working with other applications such as NFTs on the network. However, the upcoming upgrades to Ethereum are set to make the blockchain more profitable and stable. These new changes are another reason investors are rushing to grab the digital coin.

How the ‘London’ Upgrade will Change Ethereum

After analyzing the payments transactions and how they work, the Ethereum Foundation developers decided to revamp the fee system. According to Eddington, the new system will enable users to send a gas fee to miners to confirm their transactions.

Currently the miners then complete the transaction and are given a reward for their work. The problem is that when the system is congested there is a backlog created and miners only pick transactions with high fees. This method is beneficial for miners, but it isn’t beneficial for the wider community that wants a better fee structure.

The developers aim to tackle this issue by releasing EIP 1559 commonly known as the London fork. This new system will take over the gas fees with a compulsory and automatically set fee, affected by the volume of users on the network. However, for a faster transaction, a tip can be paid to the miners to do that as a priority.

Another introduction on the London fork and perhaps the most anticipated is that Ether (ETH) will be burned with every transaction and completely removed from existence. This is welcomed by investors as it will make Ethereum less available compared to current availability levels and should drive up the price markedly for each token.

Ethereum 2.0

Ethereum 2.0 is being developed to maximize the size of the network and sustainability.

It is the next big milestone for Ethereum, and it is commonly called the Merge. This will be a total overhaul in the system’s functioning, which will be finished by the end of 2021 or 2022. Currently ETH uses the proof of work system and Ethereum 2.0 will switch the entire network to Proof of Stake.

Users will be able to stake their Ethereum to validate transactions and earn a reward for staking in the form of ETH. There is currently a $10 billion stake in proof of the stake network, which they launched in the last month of 2020, called the Beacon chain which currently runs parallel to the main Ethereum blockchain.

However, there are risks associated with the newly merged system. The process has been described as trying to replace a plane engine while in flight. But users have been assured that the new code will be battle-tested, thoroughly checked over, and only implemented when it is proven.

Sharding Design to Expand the Network

The proof of stake system is considered a scalable solution. The system will be expanded further by allowing other systems such as NFTs, or decentralized finance contracts, to be used on the new network called sharding. The shading system is described as using 64 blockchains alongside the Beacon chain to increase its functionality and make it more efficient than the present system. This combination of blockchains will allow for more transactions to be processed simultaneously.

Conclusion

The major upgrades will boost the Ethereum network and help increase the value of crypto staking to a $40 billion market by the end of 2021, as reported in research by JPMorgan.

This will create a huge opportunity for crypto users to earn a significant profit. According to Worthington and his team, the new staking system will earn users $500 million annually in revenues by the end of 2025.

Leave a Reply

Your email address will not be published.

Related Articles
Read More

Ethereum Users Anxious For ETH 2.0 – How Long Will It Be?

Ethereum can be described as a lot of things, such as the world’s most popular blockchain-based development platform, one of the most important crypto projects ever to be created (second most important, actually, after Bitcoin), the birthplace of smart contracts, dApps, DeFi, NFTs, and more....
Read More

Everything You Need To Know About Gas In Ethereum

The crypto market is pretty hot (and brutal) right now. Away from prices, it’s best to understand the underlying technology and certain special jargon in blockchain and crypto. By now, you might know that Ethereum is the pioneer smart contracting network. By this, I mean...
Total
0
Share