The blockchain industry has seen a historic event. The Ethereum network, the second largest cryptocurrency by market capitalization after Bitcoin, has switched to Proof-of-Stake (PoS). The upgrade has gone smoothly, so consensus on what's happening on the network is now being achieved under the new rules. However, the changes within the blockchain are already tangible for all members of the community. Below you can find a more detailed report of the event.
Preparations to move to PoS have been underway for several years now. Meanwhile, the topic has become so popular that it has become surrounded by myths and misconceptions. So let's break down what happened and what the future holds for Ethereum.
The Ethereum network has created the first block in line with the PoS consensus algorithm. It was block number 15537394 and it was rewarded with 45 ETH, which is the equivalent of 73 thousand dollars at today's rate.
The block was acquired on 15.09.2022 at 09:42:59, but that didn't mean the success of the update. However, developers needed to continuously monitor the network to make sure it was working properly. As a result, seventeen minutes later, Vitalik Buterin, the creator of Ethereum, published a tweet where he confirmed that the blockchain update went smoothly. Here's what he wrote:
"Finalization has taken place. Happy merging everyone. This is a very important moment for the Ethereum ecosystem. Everyone who has been involved in this update should be proud of what is happening today."
The information has also been confirmed by Tim Beiko, Ethereum developer. Below his thoughts about it:
"All is well, everything has taken place. The merger has been done. Damn. Great job, guys!"
He also added a screenshot of the finalized network checkpoint, which signifies that the update was successful.
Now we need to get into the details of the update and its impact on the cryptocurrency network as well as its users.
The most notable difference in the updated network is the absence of miners, which are now replaced by validators. Accordingly, it is no longer possible to earn ETH using graphics cards.
This can be seen at the mining pools. For example, 2Miners pool not so long ago had over 100 thousand people mining ETH. Now Ethereum is not on the list of popular cryptocurrencies, and miners are actively choosing other coins.
At the moment, the most popular coin among pool miners is Ethereum Classic (ETC). ETC is mined by 24,000 people.
Overall, the disappearance of ETH from the available cryptocurrencies for mining is not a big issue. After all, there are plenty of other coins to mine: we are talking about Ravencoin, Ergo, Monero, and so on.
In the first PoS-based block already mentioned, the reward was 45 ETH, but this figure is much higher than the norm. If you look at a more recent block, you can see an award of 0.034267217668509841 ETH, for example.
This is a predictable change, as issuance on the PoS network of Ethereum is down 90 percent compared to the PoW blockchain because of the lower rewards. And because coin burning persists, it means ETH as an asset is becoming deflationary as well. That is, fewer new Ethers will be created than destroyed.
By the way, the Ultrasound Money platform shows the savings in the creation of new ETH provided by moving the Ethereum blockchain to PoS, broadcasts it live.
As the network no longer requires graphics cards, the power consumption of the blockchain has been significantly reduced. As noted today by Ethereum creator Vitalik Buterin, who was quoted by blockchain researcher Justin Drake, Eth's move to PoS will reduce power consumption worldwide by 2 percent.
The day before, it became apparent that fans of this network would be focusing specifically on reducing the energy consumption of Ethereum and its greater "greenness" in terms of the environment. In particular, representatives of the development team shared a comparison of BTC and ETH mining power consumption with YouTube and Netflix platforms, gold mining, the gaming industry, and PayPal.
As the project has previously noted, the PoS-based Ethereum requires 99.95 percent less electricity than the PoW-based network in question.
In addition, the blockchain has been more stable so far. In the first 100 blocks since the merger, only one block has been missed on the network, which is a great success. As Vitalik Buterin highlighted, this is because fewer blocks are facing capacity limits. So far, the number of fully populated blocks is dropping from 20 percent to about 10.
In the end, the developers accomplished their goal and successfully transferred the blockchain to a new consensus algorithm. From now on, Ethereum is a much greener network, and ETH itself can essentially be considered a deflationary asset.
Obviously, such a massive change for the popular cryptocurrency will affect other popular PoS projects. This includes projects like Solana, Avalanche, and many others. Well, the developers of Ethereum should move on to implement other important innovations like sharding, which this time will really affect the level of commissions in the network.