The Ethereum blockchain was launched by Vitalik Buterin in 2015, with a native currency called Ether (ETH). Today it is the second largest cryptocurrency, although it is still 19 times smaller than bitcoin in value.
Since it is much smaller, one wonders why people are interested in it. That’s a fair point. The answer lies in the fact that this king of altcoins has a lot more capabilities than bitcoin. Have you ever heard of NFTs? Web3? Decentralized applications (dApps)? NFT marketplaces? The metaverse? Well, bitcoin has little to do with all that. It is not possible to create NFTs on the bitcoin blockchain, nor to engage in the other higher-level web-related aspects of cryptocurrency.
Ethereum, on the other hand, has crypto fingers in all the virtual pies. As a result, there is genuine speculation as to whether Ether might eventually be able to leapfrog and take the top spot from Bitcoin. And last week, the altcoin finally completed the Ethereum merger, which goes a long way toward realizing that potential.
So what is a merger? At first glance, it can be seen as a massive software update. But we’re not talking about iOS 14 to iOS 16.0073641 or what it is now. If we think of bitcoin as some kind of old Nokia, Ethereum 1.0 could be like the first set of smartphones. Now, Ethereum 2.0 brings it into iPhone 14 Pro territory.
The first phase of the “merger” was completed in 2020, but it was announced in 2014, even before the launch of Ethereum 1.0. Of course, eight years in crypto time is an absolute eternity, and the many delays had people wondering if the merger would ever actually happen. But now it’s here, so let’s unpack what the upgrades really are and what they mean for crypto.
The global upgrade is a change in the way transactions are processed on the blockchain. Until now, Ethereum has operated using a “proof of work” mechanism – we explained what that is here. But in a nutshell, blockchains use a proof-of-work, stake, or history mechanism to process transactions, spot issues, mine coins, and more.
Now, Ethereum 2.0 works using “proof of stake”. In theory, this means transactions can become much faster and cheaper to process. Although it won’t happen immediately, the idea is that if the system becomes cheap and easy to use (like instant ramen), more and more people might get interested. If this happens, the supply of Ethereum, whose capacity is limited, will start to be reached, which will drive prices up. It’s kind of like the way landlords are raising rents right now: there’s a housing shortage, so landlords are charging more because, quite simply, they can.
Another good thing is that this upgrade should also further improve the security of the blockchain. This time around it doesn’t have much to do with crazy crypto technology, just the fact that Proof of Stake requires people who want to mine/process transactions to stake their coins as a sort of deposit (the advantage of staking is that you earn interest). The starting price is expected to be over £50,000, a hefty amount to be sure, but one that will apply to anyone who wants access to these blockchain elements, including hackers. Hopefully this will have a deterrent effect and fewer hacking attempts. You can still get scammed on Discords and reddit, and with any memecoin you decide to buy, but it’s still a very decent plus.
This upgrade also has huge benefits for the environment. Proof of work is actually the fossil fuel of crypto technology, which consumes masses of energy by requiring all miners’ computers to solve ridiculously complicated mathematical equations, with the first to do so being able to mine the cryptocurrency. And Bitcoin still uses it. On the other hand, Ethereum’s new proof-of-stake process could, as reported by the World Economic Forum, “reduce network energy usage by up to 99.5%. »
So they solved it, right? Does this make all other altcoins, Ethereum competitors like Cardano and Solana, and Layer 2 (if you don’t know what this hot new coin set is, read this) redundant? Well, that might make some of them less useful, but many parts serve different and specific purposes, so they’ll probably be fine. Tier 2 cryptos might even benefit, because if Ethereum wants to grow while becoming cheaper and faster, it will likely need to outsource some of the workload to other places. This is a major function and purpose of Tier 2 blockchains like Polygon (MATIC), METIS, and Loopring.
And that’s just the start of the merger. Other updates that might allow things like Web3 to grow (if the masses get on board in the future) will also start to arrive.
So yes, Fusion is an upgrade for bigwigs. Now you can tell all your friends and look smart.
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