Here's how Ethereum 2.0 promises to be green, scalable, and far more efficient
- The energy consumption by cryptocurrencies has been a cause for alarm, and has prompted global outrage amid concerns of climate change.
- The inventor of Ethereum blockchain, Vitalik Buterin, is confident that a solution isn't far away.
- Ethereum 2.0 is far more energy-efficient since the complexity of the cryptographic work is lower.
- Researchers say that energy consumption could drop massively to 1/10,000th of the current requirement.
While the fate of Bitcoin remains anyone's guess, the inventor of Ethereum blockchain, Vitalik Buterin, is confident that a solution isn't far away. He's currently working on a long-promised overhaul of Ethereum's code, which dates back to 2019. But it isn't as easy as it sounds as the blockchain can handle more tasks than Bitcoin, like storing data, supporting decisions, and automating value distribution via smart contracts. The new update to the blockchain includes radical innovations such as an entirely new concept of issuing coins, faster transactions, and reduction in energy requirement by 99%.
How will the new Ethereum blockchain change?
Officially dubbed Ethereum 2.0, it'll shift to a "proof-of-stake" (PoS) model from a "proof-of-work" (PoW) model. Bitcoin leverages the latter, and it's very energy-intensive as computers compete against each other to process transactions and get rewards (these rewards are technically mined coins). On the flip side, the participants in PoS are called validators instead of miners. Every validator has to put up a stake as collateral. In return, the stakers are rewarded with Ether for their efforts. So it's being collected as passive income, and payouts shall also be received over time. It’s worth noting that Ethereum is the blockchain, and its cryptocurrency is technically called Ether.
The new process is far more energy-efficient since the complexity of the cryptographic work is lower. Each node is responsible for staking its currency to participate in the process. Instead of millions of processors going after the same transaction, PoS randomly assigns one for the job. A minimum of 32 Ether is required for a user to stake on the new network.
A green cryptocurrency designed for the future
Researchers say that energy consumption could drop massively to 1/10,000th of the current requirement. For reference, Bitcoin requires 707 KWh of electricity, while Ethereum comes at 62.56 KWh. In contrast, Ethereum 2.0 will be exceptionally efficient.
The internet is powered by servers, which require bare minimum electricity when compared to a processor. The Chia Network also applies PoS for what it calls "farming."
Ethereum 2.0 is happening in stages, and the first is numbered as Phase 0, or called the beacon chain and is already live. It introduces the new PoS model, prepares the blockchain for staking, and serves as a trial-and-error zone for future versions.
The upgrade will most likely reduce transaction fees within the network due to efficiency, enabling smaller transactions. The technological shift will help people who still can't access modern banking systems and need a hassle-free but reliable currency. It'll also help in cryptocurrency adoption as large institutions are much more likely to favour one with a cutting-edge backend. Bitcoin is 13 years old and is gradually starting to lose its charm, technologically.
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