Ethereum: The transformation that could see it overtake bitcoin

Asia's Tech News Daily

#bitcoin, #cryptocurrency, #Ethereum

The world’s second most valuable cryptocurrency, ether, has been touching all-time highs in price ahead of a major upgrade of its underlying platform, ethereum.

Ether is currently worth in aggregate just shy of US$500 billion (363 billion).

That’s still slightly less than half that of the biggest cryptocurrency, bitcoin.

But could this upgrade, a vital step towards a much greener and faster version of the current system, put ethereum on the path to becoming the dominant platform on the internet and make ether number one?

First of all, it’s important to understand the difference between bitcoin and ethereum.

Bitcoin is a system for allowing people to send value between one another without the need for banks.

It is built on a technology known as blockchains, which are online ledgers whose transactions are checked and recorded by a decentralised network of computers known as validators.

These validators are incentivised for their work by receiving newly minted bitcoin as rewards, in what is known as mining.

To make this more attractive, bitcoin is relatively scarce: only around 18 million coins are in existence and the protocol is such that there can never be more than 21 million.

Ether works in a similar way to bitcoin, but ethereum is different.

It is a worldwide software platform with no host, on which developers are building thousands of blockchain-based applications.

This means these applications can all run without being controlled by a company.

Examples include cryptocurrency exchanges, insurance systems, and new kinds of gaming.

At the heart of the platform is the idea of smart contracts, which are automated agreements that ensure that money and assets change hands when certain conditions have been fulfilled.

All transactions on the platform ultimately use ether, and the success of the platform is why ether has been the second-largest cryptocurrency after bitcoin for the past few years.

The fact that ether fuels the platform even being referred to as gas fees gives it a utility and an intrinsic value that bitcoin does not have.

Why ethereum 2.0

Ethereum has several major problems, however. The first is that gas fees have become very expensive in the last couple of years because the network has become so popular and is therefore very congested.

Validators prioritise users who are willing to pay the highest fees for their transactions. For example, the average transaction at the time of writing on crypto exchange Uniswap costs around US$44 in gas fees.

Bitcoin has comparable issues with congestion, which its developers are trying to solve by building applications like Lightning on top which boast faster transaction speeds.

The second problem for ethereum is that, as it has become more popular, the amount of computational power used by validators has rocketed. It’s the same problem that has brought a lot of negative publicity to bitcoin, because it uses a lot of electricity.

Bitcoin is currently using as much power as the whole of the Philippines, although its supporters argue that much of this is power that would otherwise be wasted – for example, oil rigs burning off natural gas because it’s not profitable to sell it. Proponents also point out that the network is shifting towards using much more renewable power over time.

At any rate, the eventual creation of an ethereum 2.0 will solve these problems by moving the platform’s system of validation from “proof of work” to “proof of stake”.

Without getting into too many details, proof of work is a protocol in which validators all attempt to solve complex equations to prove that each proposed transaction is valid. With proof of stake, there’s no need for all validators to do this power-hungry work, because the system chooses one at random to confirm each transaction.

Many in the bitcoin community are against proof of stake because it gives the most power to the biggest validators, potentially allowing them to corrupt the system of validation if they can get control of more than half of the network. Ethereum supporters counter that proof of stake has checks and balances built in that would prevent this from happening.

Either way, ethereum 2.0 promises to reduce the platform’s power consumption by 99.9%, making it far more sustainable. It should also solve the problem with gas fees by raising the platform’s processing ability from 30 transactions a second to potentially 100,000, as well as making possible more sophisticated smart contracts than before.

How it’s going

The transition to ethereum 2.0 has been a slow one, riddled with technical issues that have dragged on for over two years. For the past few months, the new proof-of-stake blockchain has been running in a test format in parallel with the existing system, allowing the developers to prepare it for a merger in 2022.

The forthcoming upgrade is essentially a warm up for this merger. Known as Altair, it introduces numerous technical changes that are designed to keep validators honest and make the system more decentralised. Assuming this goes ahead as planned, all eyes will be on the merger, and then later another change known as “sharding” which will greatly increase the system’s processing capability.

Certainly the price of ether has been strong ahead of the Altair upgrade. The recent surge in bitcoin to all-time highs has been helping to lift the entire crypto market. But some of the price movement in ether probably reflects people betting that the upgrade will succeed, while the rest is from speculators switching from bitcoin, and new money moving into the space.

In the run-up to the merger of ethereum’s two blockchains, it will be interesting to see how all this affects ether’s price in relation to the so-called “eth killers”. These are rival platforms like cardano and solana that have been very popular in recent months partly due to ethereum’s problems with fees.

But ultimately the question is what it will mean for bitcoin. Bitcoiners will continue to argue that their protocol is more decentralised than proof of stake, and they have the advantage of being the crypto brand that investors are most comfortable risking their money with.

The question is whether these advantages are outweighed by ethereum 2.0’s greener credentials and the fact that it can handle more transactions. Bitcoin is currently worth about double ether, but talk comes and goes about a “flippening” where ether overtakes it. Could it happen in 2022? With bitcoin’s hegemony at stake, it will be fascinating to find out.

Internet Explorer Channel Network
Asia's Tech News Daily
News Related

OTHER NEWS

Hitachi and A*Star extend 3D-printing partnership for another 3 years

Second Minister for Trade and Industry Tan See Leng touring the SIMTech-Hitachi joint lab at Hitachi Metals’ plant in Tuas on Dec 3, 2021. SINGAPORE – Manufacturers in Singapore which ... Read more »

Singapore public offer of Digital Core Reit IPO is 16.1 times subscribed

No. 2401 Walsh Avenue in Silicon Valley is among the data-centre assets in Digital Core Reit’s initial portfolio. SINGAPORE (THE BUSINESS TIMES) – Pure-play data centre real estate investment trust ... Read more »

McDonald's Singapore adds Angus Mushroom Supreme, Sea Salt McFlurry to the menu

Photo by: McDonald’s Singapore Website McDonald’s Singapore just expanded its menu list with the addition of two new items. The restaurant chain was bringing back the Angus Mushroom Supreme burger ... Read more »

Hong Kong audit regulator, professionals deny claims of non-cooperation made by SEC's Gary Gensler

Hong Kong’s audit regulator and professionals have hit back against claims by the US Securities and Exchange Commission (SEC) that the city along with China does not cooperate with regulators ... Read more »

Johnson pledges legal help to woo electric vehicle giant Rivian to Britain

The PM has told Rivian boss RJ Scaringe that the government would use a special development order to facilitate the rapid construction of a new manufacturing plant at a site near Bristol, Sky News learns. Read more »

Markets in search of a direction as year-end nears

After topping 18,600 points in October, the benchmark Nifty 50 of the National Stock Exchange is now back to 17,200, the level where it was 12 weeks ago. In a ... Read more »

India's biggest Maruti dealer sells Hyderabad property for Rs 37 crore

Hyderabad 60.3 (Image: Reuters) Vallurupalli Varun Dev, who owns Varun Motors that claims to be India’s biggest Maruti car dealer, has sold a property in Hyderabad’s posh Jubilee Hills for ... Read more »

Ian King Business Podcast: Bounce-back fraud, Turkish inflation and Glorify app funding

Listen to “Bounce-back fraud, Turkish inflation, Glorify funding”. Today Sky’s Ian King is in conversation with the head of the National Audit Office, as the government comes under fire for ... Read more »

US largest trading partner of India during April-October: Govt

Source: AP The government on Friday said during the April-October period this fiscal, the US has once again emerged as the largest trading partner of India with bilateral merchandise trade ... Read more »

Berkshire executive Charlie Munger says China was ‘correct' to ban crypto

Charlie Munger made headlines this fall for designing and funding a controversial and mostly windowless mega-dorm at the University of California, Santa Barbara. AFP via Getty Images The current market ... Read more »

Foreign Affairs can leave the whole world outside the EU ‘orange'

The Ministry of Foreign Affairs does not have to adjust the travel advice to destinations outside the European Union. The ministry is allowed to give distant countries an orange travel ... Read more »

Emirates to buy 80 French fighter jets in 17 billion euro deal

Photo: ANP The United Arab Emirates has signed an agreement to buy 80 Rafale fighter jets from France. The purchase is part of a deal worth a total of 17 ... Read more »

Travel companies back down with judge: world remains orange, no separate advice for vaccinated

The companies wanted the generic orange travel advice for countries outside the EU to be dropped and demanded ‘reliable’ travel advice. The judge didn’t want to do that. Although it ... Read more »

Philips and Aegon put AEX in the red again

The Amsterdam AEX index returned an earlier profit on Friday and fell into the red, due to significant price losses by Philips and Aegon. Prosus also fell due to price ... Read more »

India can lead the digital society and become a global leader in its own right, says Mukesh Ambani

Mukesh Ambani, Chairman, Reliance Industries The first two decades of this century have seen exponential growth in connectivity technology, computing technologies, next-generation silicon chips and the convergence of many technologies leading to ... Read more »

China Tourism Duty Free postpones Hong Kong listing amid sluggish capital market conditions

China Tourism Group Duty Free has postponed its multibillion initial public offering in Hong Kong with the world’s largest travel retailer by sales blaming sluggish market conditions for the decision. ... Read more »

Service providers are busier, but Omikron is lurking

Photo: ANP Service providers in the euro countries got busier in November, but there may be a temporary effect. Companies indicated to research agency IHS Markit that they had fewer ... Read more »

‘We've been through quite a bit of shit together'

Eve“We live quite close to each other. So we put our agendas side by side: shall we fix that we have one day off a week together? That we can ... Read more »

Coal India auction to non-power sector up sharply on last year

Coal-India | Representative image State-run Coal India auctioned 3.2 million tonnes of coal exclusively for the non-power sector in November, a senior company official said, more than five times higher ... Read more »

Bank of England rate hike supporter gets Omicron jitters as firms face 'strongest inflation pressures for 23 years'

Michael Saunders indicates he could withdraw his support for a rate rise this month as the new COVID variant threatens to inflict more damage on the UK and wider global economy. Read more »

Brussels: industry must do more to prevent hacks

According to outgoing minister Stef Blok (Economic Affairs), government intervention is justified now that cyber incidents have increasingly greater economic and social consequences. In our country, for example, it was ... Read more »

Co-working market size to double over next 5 years at 15% CAGR: Report

Flexible workspaces are the preferred way to adopt the hybrid work model in a post-pandemic world, compared to options like changing existing office layouts or the hub-and-spoke model. This, among ... Read more »

Gainers & Losers: 10 stocks that moved the most on December 3

Indian Benchmark indices snapped the two-day winning streak and ended lower, with the Sensex closing below the 58,000-mark. At close, the Sensex was down 764.83 points, or 1.31%, at 57,696.46, ... Read more »

Affordable Housing | India on top for first-time homebuyers, South Korea among last three

India is among the top 10 countries in the world where buyers find it easier to purchase their first home and get on the property ladder, an analysis by Investing ... Read more »

Mark Mobius sees 10-15% correction in Indian markets but remains unconcerned

NEW DELHI: While many foreign institutional investors are pulling money out of India, renowned emerging markets investor Mark Mobius remains confident of the strength of the bull market in the ... Read more »

COVID aid scheme fraud losses will not be recovered

Read more »

Some taxpayers get lower amounts as refunds: Here's what you must know

If you filed your income-tax returns early this year – well ahead of the December 31 extended due date – you would have mostly received a refund on any excess ... Read more »

Sensex snaps rally, tanks over 700 Pts: 5 factors that pulled markets down

The market corrected sharply after a stellar 2.5-percent gain in the last two sessions. The benchmark indices fell over 1 percent each on December 3. The BSE Sensex dropped 765 points, or ... Read more »

Despite cancellations by foreigners, tourism industry hopes for a bumper Christmas and New Year

Follow COVID-19 safety precautions like avoiding touching surfaces unnecessarily. If you need to touch anything, sanitize your hand properly, especially before eating and touching your eyes and nose. (Representative image: ... Read more »

Cowed by China, ride-hailing giant Didi plans to leave U.S. stock market months after debut

Didi had pushed ahead with a $4.4 billion U.S. initial public offering despite being asked to put it on hold while a review of the company’s data practices was conducted. Read more »

Outsized risks, outsized gains: How to become a successful angel investor in the unicorn era

Note to readers: This is the third episode of a new series of articles, designed to give our readers an edge on matters of competitiveness, upskilling/reskilling and knowledge gathering. Essayed in ... Read more »

Minister promises to put a stop to boiling crustaceans alive

Photo: amazingindian via Wikimedia Commons Agriculture minister Carola Schouten will put a stop to the practice of boiling crabs and lobsters alive, she promised MPs during Thursday’s debate on her ... Read more »

Latinas in trucking are finding their place — in the driver's seats of 18-wheelers

“I never in my head would have thought that I would be able to or I would be in truck driving,” says Tracy Barajas, a Latina trucker from California. Read more »

UIDAI getting Aadhaar future-ready, looking to collaborate with international organisations

UIDAI is currently doing 50 million Aadhaar authentications a day The Unique Identification Authority of India (UIDAI) is prepping to use Aadhaar for more use cases and collaborate with organisations ... Read more »

Buy HG Infra Engineering; target of Rs 820: Emkay Global Financial

Emkay Global Financial’s report on HG Infra Engineering Our recent interaction with HG Infra’s management has quite positively refined our outlook on the business, built upon strong execution in H1FY22 ... Read more »

RBI new norms likely to increase NBFCs bad loans by one-third: Study

Representational image The recent clarification by the Reserve Bank of India on non-performing advances (NPA) may increase non-banking financial companies’ (NBFC) bad loans by one-third, says a report. Last month, ... Read more »

Hong Kong demands airlines use separate crew for China flights Coronavirus' Omicron variant prompts tough new measures

Cathay Pacific planes are parked on the tarmac at Hong Kong International Airport on Oct 24 2020. (Reuters photo) HONG KONG: Hong Kong health officials have asked airlines to begin ... Read more »

Unacademy announces programme to educate 5 lakh girl students in India

Image: Shutterstock Online education startup Unacademy on Friday announced a new programme – Shikshodaya – that aims to educate five lakh girl students in the country. Unacademy, which is backed ... Read more »

China's Kaisa starts talks with bondholders as default threat looms

Chinese property developer Kaisa Group Holdings Ltd has begun talks with some of its offshore bondholders over extending the deadline for a $400 million debt repayment due next week, two sources ... Read more »

Biden's push against sanctions on Russia's pipeline puts Democrats in a bind

Germany supports the controversial Nord Stream 2 pipeline, and Biden has chosen not to confront Berlin about the issue. Read more »
On free-english-test.com you will find lots of free English exam practice materials to help you improve your English skills: grammar, listening, reading, writing, ielts, toeic