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Cryptocurrency mining is a process that consumes a lot of energy due to the high amounts of computing required. As a result of this, an alternative method with a minimal environmental effect has been created to reduce the electricity and carbon footprint that cryptocurrencies produce. By Q4 of 2022, Ethereum 2.0 which will be employing this method is set to be released. In this article, we will be explaining Ethereum 1.0, Ethereum 2.0, and its benefits.
*The content hereby presented is for informational purposes only. Nothing of this content that is available to you shall be considered as financial, legal or tax advice. Please, keep in mind that trading cryptocurrencies pose a considerable risk of loss.
To process cryptocurrencies, the way that transactions are validated and added to the blockchain is controlled by a ‘consensus mechanism’. The two biggest cryptocurrencies, Bitcoin and Ethereum 1.0 employ ‘proof of work’ which is the consensus technique that is used most frequently. Cryptocurrency miners - virtual miners that should resolve a challenging mathematical puzzle are at the centre of this system. The first miner to figure out the issue adds the most recent, validated transactions to the blockchain and is rewarded with a fixed sum of coin.
A single Ethereum 1.0 transaction can use as much energy as the typical US home does in a week. This process necessitates a tremendous amount of computational power and electricity. Another significant problem is the electronic waste produced by the specialised equipment and computer servers used in mining, which often have a short lifespan. As a result, mining cryptocurrencies using the proof-of-work consensus technique has a clear negative impact on the environment.
Moreover, blocks on Ethereum are becoming more difficult to mine due to high demand and volume, which makes the entire process slower and more expensive. The gas costs that Ethereum miners charge have increased as a result of the requirement for additional power to create blocks and enable the network to advance. Thereby, when many users are attempting to access the network, it becomes highly slow.
To reduce its environmental impact, and provide faster and cheaper transaction processing, Ethereum is transitioning to a consensus mechanism known as ‘proof of stake’. Ethereum 2.0 is a new version of the Ethereum blockchain that will use a proof of stake consensus mechanism to verify transactions via staking. In a proof-of-stake system, a network of "validators" participates in or "stakes" their own cryptocurrency in return for the opportunity to approve the new transaction, update the blockchain, and receive payment for doing so.
Based on how much coin each validator has in the pool and how long it has been there, the network employs an algorithm to choose a winner. Other validators can vouch for the correctness of the block of transactions once the "winner" has verified it. The network updates the blockchain after a predetermined amount of attestations have been made. Depending on their initial investment, each participating validator then receives a payout in the local coin.
The difference in energy use between the two consensus procedures is significant. The proof of stake consensus mechanism ETH2.0 utilises 99.95 percent less energy than the proof of work consensus technique. Additionally, the hardware needed is more generic and comparable to a typical laptop, allowing the network to grow and lowering the amount of electronic trash produced. Moreover, proof-of-stake will be consuming less time and money. Meanwhile, Ethereum mining will cease to generate revenue any more.
The ETH2.0 migration is an ambitious but necessary process due to the many reasons noted in this article. It will involve the merging of Ethereum’s mainnet with ETH2.0’s ‘Beacon Chain’ which will enable the full staking process. There have, however, been significant delays in ETH2.0’s release; it was originally set to be implemented back in 2019 and there is still speculation on when it will actually happen. This is due to a number of reasons, mostly being that blockchain technology is in its relative infancy, even truer-so with proof of stake consensus mechanisms. The official date has now been set for mid September 2022.
We may see cheaper transaction or ‘gas fees’, we may see a renewed rush of traffic or we may see something unforeseen that we didn’t know the technology may permit. One thing is for certain, however; ETH2.0’s proof of stake model is a far more symbiotic relationship than proof of work because of the massive amount of users on the Ethereum blockchain; not to mention the massive environmental upside ETH2.0 offers.
*The content hereby presented is for informational purposes only. Nothing of this content that is available to you shall be considered as financial, legal or tax advice. Please, keep in mind that trading cryptocurrencies pose a considerable risk of loss.
Cryptocurrency mining is a process that consumes a lot of energy due to the high amounts of computing required. As a result of this, an alternative method with a minimal environmental effect has been created to reduce the electricity and carbon footprint that cryptocurrencies produce. By Q4 of 2022, Ethereum 2.0 which will be employing this method is set to be released. In this article, we will be explaining Ethereum 1.0, Ethereum 2.0, and its benefits.
To process cryptocurrencies, the way that transactions are validated and added to the blockchain is controlled by a ‘consensus mechanism’. The two biggest cryptocurrencies, Bitcoin and Ethereum 1.0 employ ‘proof of work’ which is the consensus technique that is used most frequently. Cryptocurrency miners - virtual miners that should resolve a challenging mathematical puzzle are at the centre of this system. The first miner to figure out the issue adds the most recent, validated transactions to the blockchain and is rewarded with a fixed sum of coin.
A single Ethereum 1.0 transaction can use as much energy as the typical US home does in a week. This process necessitates a tremendous amount of computational power and electricity. Another significant problem is the electronic waste produced by the specialised equipment and computer servers used in mining, which often have a short lifespan. As a result, mining cryptocurrencies using the proof-of-work consensus technique has a clear negative impact on the environment.
Moreover, blocks on Ethereum are becoming more difficult to mine due to high demand and volume, which makes the entire process slower and more expensive. The gas costs that Ethereum miners charge have increased as a result of the requirement for additional power to create blocks and enable the network to advance. Thereby, when many users are attempting to access the network, it becomes highly slow.
To reduce its environmental impact, and provide faster and cheaper transaction processing, Ethereum is transitioning to a consensus mechanism known as ‘proof of stake’. Ethereum 2.0 is a new version of the Ethereum blockchain that will use a proof of stake consensus mechanism to verify transactions via staking. In a proof-of-stake system, a network of "validators" participates in or "stakes" their own cryptocurrency in return for the opportunity to approve the new transaction, update the blockchain, and receive payment for doing so.
Based on how much coin each validator has in the pool and how long it has been there, the network employs an algorithm to choose a winner. Other validators can vouch for the correctness of the block of transactions once the "winner" has verified it. The network updates the blockchain after a predetermined amount of attestations have been made. Depending on their initial investment, each participating validator then receives a payout in the local coin.
The difference in energy use between the two consensus procedures is significant. The proof of stake consensus mechanism ETH2.0 utilises 99.95 percent less energy than the proof of work consensus technique. Additionally, the hardware needed is more generic and comparable to a typical laptop, allowing the network to grow and lowering the amount of electronic trash produced. Moreover, proof-of-stake will be consuming less time and money. Meanwhile, Ethereum mining will cease to generate revenue any more.
The ETH2.0 migration is an ambitious but necessary process due to the many reasons noted in this article. It will involve the merging of Ethereum’s mainnet with ETH2.0’s ‘Beacon Chain’ which will enable the full staking process. There have, however, been significant delays in ETH2.0’s release; it was originally set to be implemented back in 2019 and there is still speculation on when it will actually happen. This is due to a number of reasons, mostly being that blockchain technology is in its relative infancy, even truer-so with proof of stake consensus mechanisms. The official date has now been set for mid September 2022.
We may see cheaper transaction or ‘gas fees’, we may see a renewed rush of traffic or we may see something unforeseen that we didn’t know the technology may permit. One thing is for certain, however; ETH2.0’s proof of stake model is a far more symbiotic relationship than proof of work because of the massive amount of users on the Ethereum blockchain; not to mention the massive environmental upside ETH2.0 offers.
*The content hereby presented is for informational purposes only. Nothing of this content that is available to you shall be considered as financial, legal or tax advice. Please, keep in mind that trading cryptocurrencies pose a considerable risk of loss.
