With Ethereum’s recent overhaul, called the Ethereum Merge, developers are looking to mitigate the excessive energy consumption involved in mining cryptocurrencies. Ethereum 2.0, the new version of Ethereum, promises reduced energy use, faster transactions, and lower gas fee.
What are the chances of Ethereum 2.0 actually delivering on its promises?
- The Ethereum blockchain upgrade promises to enhance the network and reduce energy consumption.
- It is said that proof-of-stake consensus mechanisms are more environmentally friendly than proof-of-work consensus mechanisms.
- With the upgrade, the network will attract more decentralized apps, so it is difficult to determine when and how much energy consumption will be reduced.
Ethereum 2.0 and the Proof-of-Stake (PoS) Model
Ethereum mining has become obsolete with the shift from a proof-of-work (PoW) model to proof of stake (PoS). This means that the creation of the native token Ether won’t require energy-intensive computers. In theory, this will result in a 99.95% reduction in energy consumption by the Ethereum network. It will take some time to determine the environmental impact of moving to a PoS model because the Ethereum blockchain network will also be used more. With the change, the blockchain network will attract more decentralized apps and non-fungible tokens.
Having said that, the move to a PoS model would give Ethereum a major advantage over the world’s largest blockchain network, Bitcoin, as it would be more environmentally friendly and therefore more sustainable in the long run. But this does not mean that Ethereum can push Bitcoin out of the top spot among cryptocurrencies. Ethereum has other issues that have caused users to begin seeking alternatives. Chief among them is Ethereum’s sky-high transaction fees.
Will Ethereum 2.0 Reduce the Gas Fee?
In theory, Ethereum 2.0’s switch from proof of work to proof-of-stake blockchain governance should enhance the network’s security and scalability. As a result, it should reduce the gas fee required with every transaction on Ethereum. However, determining how much the gas fee will be reduced is not easy because it varies, and the volume of Ethereum’s transactions can cause the fee to increase or decrease.
Ethereum 2.0 hopes to improve the network’s capability and efficiency by introducing sharding, which will split the network into multiple pieces to handle transactions more quickly.
Ethereum projects that sharding will increase the speed of the network from 25–30 transactions per second (TPS) to several thousand transactions per second, maximizing at 100,000 TPS. While this sounds promising for Ethereum, the network’s fees need to drop from their current rates, which shot up to more than $20 per transaction in 2021, down to a fraction of a cent to keep up with the competition. Networks like Cardano offer much more affordable fees than Ethereum, and Ethereum will have its work cut out for it to win back users who have fled to less expensive competitors.
The Future of Ethereum
Ethereum 2.0 offers much in the way of improvements for the network, but it has been unable to meet the timetable that it had announced earlier. According to the mastermind behind the Ethereum blockchain, Vitalik Buterin, the transition to Ethereum 2.0 is going to be a longer process than simply implementing the PoS model.
The next stage for Ethereum involves lower gas fees, faster speeds, and fewer emissions, but it could take time for this dream to be achieved. This revision to the Ethereum blockchain could put the network on top among cryptocurrencies—if it manages to provide a better experience for investors than it has in the past.
What is Ethereum 2.0?
Ethereum 2.0 is a broad term used to cover several improvements to the Ethereum cryptocurrency network that tackle some of its most pressing technical hurdles. It is a major upgrade for the Ethereum network, shifting the network to proof of stake (PoS) from the proof-of-work (PoW) model. Ethereum 2.0, or ETH2, is an informal name—the Ethereum Foundation prefers to refer to Ethereum 2.0 as the consensus layer and ETH 1.0 as the execution layer.
How much energy will Ethereum 2.0 save?
After shifting from proof of work to proof of stake, the energy consumption on the Ethereum network will be reduced by 99.95%. This indicates that staking is 2,000 times more efficient than traditional mining.
What is sharding?
Sharding is a database-partitioning technique used by blockchain companies to achieve scalability, enabling them to process more transactions per second (TPS). Sharding splits a blockchain company’s entire network into smaller partitions, known as shards. Each shard is composed of its own data, making it distinctive and independent compared with other shards. Sharding can help reduce the latency, or slowness, of a network.
The Bottom Line
Ethereum 2.0, the evolution in progress to a better-performing, more accessible network, has begun. The updates promise to cut back on emissions and make the network more energy-efficient while improving speeds and cutting transaction costs. However, Ethereum has much ground to cover to beat competitors.