Years in the making, Ethereum 2.0 promises a litany of much needed upgrades. While 2.0’s roll-out officially began at the end of 2020, the new blockchain is far from functional. Instead, the original Ethereum network remains in use – alongside a variety of persistent problems. ETH provides infrastructure to a large subset of the cryptocurrency industry, and as such drives an intense amount of traffic. During periods of heightened interest, this strains the blockchain and creates unfeasible transaction costs.
Ethereum’s first mover status grants it some leeway. Yet transaction fee averages in the double digits will drive consumers to other projects. In the same way that perceived inefficiencies in Bitcoin created the cryptocurrency industry, Ethereum 2.0’s delay may invigorate alternative smart contract projects. As it stands, however, over 3 million ETH are staked in 2.0’s ‘Beacon Chain’. Outside of a handful of byzantine methods, this ETH will remain inaccessible until the release of 2.0 – representing a major vote of confidence by investors.
Growing Pains
The current cryptocurrency boom has some long-term investors feeling a sense of déjà vu. Late 2017’s explosive rise in value brought similar issues to most major blockchains. Bitcoin and Ethereum both suffered from intense transactional friction that sparked an arms race for sidechain solutions. Bitcoin’s sidechain system, the Lightning Network, continues to improve and adapt to market conditions. Ethereum’s equivalent, Raiden, continues to struggle.
Leading graphics card producer Nvidia chimed in, as well. To curtail the shortage of GPU hardware caused by cryptocurrency miners, they’ve announced chances that will forcibly limit mining efficiency on their new models. Counterbalancing this change, they’ve also announced a new line of hardware designed specifically for mining Ethereum. Their new Cryptocurrency Mining Processor, or CMP, cannot be used as a graphics card.
Ethereum 2.0
When it does arrive, Ethereum 2.0 will bring two critical changes. First, it will shift Ethereum away from the power-hungry proof-of-work mining system. Instead, it will use the much more ecologically friendly proof-of-stake validating system. Second, it will increase Ethereum’s transactions per second from 14 to nearly 100,000.
No hard release date is set for Ethereum 2.0, but rather a nebulous ‘Mid-2021’. Given the current market and network conditions, Ethereum’s development team will likely push for the earliest possible release – within reason. A failed launch could be disastrous, and not just for Ethereum. release – within reason. A failed launch could be disastrous, and not just for Ethereum. A difficult transition to 2.0 could cause damage to the entire industry.
