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June Katz 5 min read

What’s Up with the Ethereum Upgrade? The State of the Network in 2022

What’s Up with the Ethereum Upgrade? The State of the Network in 2022

The entire crypto community is waiting for the release of the second version of Vitalik Buterin's cryptocurrency network. It will allow you to receive passive income for altcoin storage, increase the transaction speed by almost 70 times and forget about mining.

It has long been known that Ethereum developers are planning to switch to Proof-of-Stake. This will mean the termination of the use of the Proof-of-Work (PoW) algorithm, ETH mining by solving complex mathematical problems (mining). Now the key value will be played by the number of tokens that are stored on the user's account.

The transition to Ethereum 2.0 is announced for 2022, the release date has been pushed back. 

In a conversation with a blogger Compass Mining, key developers of Ethereum 2.0 Ben Edgington, and Tim Beiko said that everything is almost ready, but the 1st quarter of the year is already over, and the transition is not completed yet.

Despite all its achievements, the low scalability and high cost of financial transactions remain the "Achilles heel" of the Ethereum network. There is a real danger of "competition for transactional space and the use of blockchain has already become expensive, but soon the cost of services may increase by another five times. 

At the moment, the altcoin blockchain is capable of conducting up to 15 transactions per second. This indicator is more than two times higher than that of bitcoin. However, for a large number of users, this speed is not enough. For example, the Visa payment system can carry out up to 24 thousand transactions per second.

The development of Optimistic Rollup will help solve the scalability problem. According to Vitalik Buterin, the creator of Ethereum, its implementation will occur after the altcoin network is updated. This will increase its throughput to 1000 transactions per second.

As a solution, Buterin sees a departure from the verification model of each device in the network of each transaction and switches to a random verification model. Yes, this will slightly reduce security, but it will significantly reduce costs (up to 100 times from each transaction).

Another solution to the scalability problem will be the introduction of sharding. Now the Ethereum network is a common database. After the update, the blockchain will be divided into autonomous, interacting shard chains, each of which will process its transactions and smart contracts.

Vitalik Buterin in an interview with The Toronto Star stated that what he cares about is taking blockchain technology behind bitcoin that makes decentralized cryptocurrency possible and making it more general-purpose so that other things can be decentralized in the same way.

Several big steps have already been taken to solve the problems facing the ecosystem. In the spring of 2021, The Berlin hard fork was launched. It was a network upgrade that changes the underlying Ethereum protocol, created new rules to improve the system, regulates gas fees, and adds new transaction types.

Now it's the turn to launch the London hard fork which will go live on block 12 965 000 (On 15 April it’s 12,624,311). 

London hard fork should solve the problem of mining centralization. The mining process in the Ethereum blockchain is gradually ceasing to be fair. Miners with a reserve of funds buy special integrated circuits designed for ETH mining. This gives them the ability to mine blocks faster than users with GPUs.

As a result, ordinary miners with GPU began to underwork, and some of them switched to mining other assets. Ether developers are aware of the fact of the problem with the complexity of mining and plan to replace the consensus mechanism. Approximately in the 3rd quarter of 2022, the Ethereum blockchain will switch to the Proof-of-Stake system.

When switching to the Proof-of-Work algorithm, the network operation will be provided by remote servers running the master node software. It can be a home computer or a laptop with a certain amount of funds.

To participate in Ethereum stacking, you need to keep at least 32 ETH in your wallet. In June 2020, the number of addresses with more than 32 ETH was close to 120,000. In the first 5 months of this year, this value increased by 13%.

According to the roadmap of the project, the annual return on stacking will vary from 1.81% to 18.1%. At the moment, the exact values are unknown. The profitability will depend on the number of participants. The more of them there are, the lower the amount of remuneration will be. 

Together, the growing shortage of coins, increased demand, as well as the influx of capital from large investors can have a serious impact on the price and its growth, respectively. At the moment, the value of ETH has already exceeded $ 3,000. Sometime after the activation of the hard fork in London, the price may rise even more.

The potential goal of ETH is to update the historical maximum, which is at around $ 4380. Thus, only if the record value is updated, investors can potentially make a profit of almost 50%. Unlike investors in the United States, who are still waiting for certainty in the regulation of the crypto market, investors in the CIS can already legally and safely invest in cryptocurrencies. You can exchange and buy cryptocurrencies on the SwapSpace crypto exchange.

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