After Bitcoin's halving completed on 11st of May, the cryptocurrency industry's switch have now turned to Ethereum 2.0, which will change the consensus algorithm of the network from Proof of Work (PoW) to Proof of Stake (PoS). Many prominent figures in this industry are supportive of this change as they believe this will bring the best out of Ethereum, in terms of scalability, security and network safety.
At the moment, there's no definitive date about the update, however it has been said that the process will happen until the end of the year. Ethereum core team are working hard to complete the 'migration' and this event will obviously raise the interest towards other Proof of Stake coins as well.
So, before we go into detail about the potential impact, let's see what is Ethereum 2.0 and why they have made this decision.
What is Ethereum 2.0?
In Consenys' words, the Ethereum 2.0 ''is the next upgrade'' to the Ethereum blockchain. Ethereum 2.0 will be released in multiple “Phases” starting in 2020 with Phase 0. Each phase will improve the functionality and performance of Ethereum in different ways.
Obviously, the main difference will be the consensus algorithms. Ethereum developer Joseph Chow explains the differences between Ethereum 1.0 and Ethereum 2.0 and he said 'this is like road vs. highway.'
Mining on the Ethereum network will be a thing in the past when this completed. Instead, people who are looking for additional revenue will need to stake their coins, which is 32 ETH. This number will allow people to become 'validators' and many analyst argued that staking Ethereum would be shrewd piece of business. But of course, you don't need to have exact amount of ETH (which is 32 ETH) to stake cryptocurrencies. Like others, there will be staking pools for people who has under 32 ETH. And with doing that, you can join a pool and start earning from Ethereum with staking.
Ethereum core developers stated that mining requires and consumes tons of energy and there is a need of significant investment to complete the process. However, in Proof of Stake, all you need is just one laptop or desktop to stake your coins. This is reducing the barrier to entry to participating in consensus process, and this will also help more people to have a word on Ethereum network. In Proof of Work model, it's unlikely that you can find that because lots of big mining companies have already great rigs and resources in place.
Right now, with current prices as of the writing, $6000 would be enough to secure your place in the second best cryptocurrency in the world, after Bitcoin. But if Ethereum decided to kept Proof of Work, then an investment for $6000 would probably mean nothing, comparing to big players in the mining market.
After briefly explaining what is Ethereum 2.0, now let's see what will be the two main improvements to the network, apart from the consensus change:
Scalability: It's obvious that the biggest improvement will be in terms of scalability. That's the main advantage of Proof of Stake, comparing to Proof of Work. Right now, the most easily scaleable projects are using Proof of Stake algorithms. Ethereum is already one of the best on that regard, however they left behind after new projects emerged in the past couple of years. Ethereum co-founder Vitalik Buterin stated the change will allow them to scale 50 times faster.
Privacy: One of the most important upgrades will come to Ethereum platform with this update is privacy features. Privacy is an important factor for crypto networks, which is something you can not find in Bitcoin at the moment. This privacy will allow people to make transactions anonymously, and therefore improve Ethereum's usage rates.
How It Will Affect Other Proof of Stake Coins?
Obviously, Ethereum's new update will have big impact on other Proof of Stake coins. It will help to raise awareness in terms of the algorithm, and many people who currently have no idea about the process will know a thing or two about PoS system in the future. Many people also think once Ethereum's update is completed, this will increase the adoption rate of other PoS coins as well.
So, let's see in detail what will be the impact of this update on Proof of Stake coins:
1-) Increased Awareness & Adoption
Proof of Stake is a relatively new concept and there are many people in this sphere that have no idea about how it works. In contrast, people and investors are familiar with the concept of mining because of Bitcoin's presence. However, this will change slowly in the future because the second biggest cryptocurrency is now switching from mining to something better. This will accelerate the process and other projects will likely to follow the suit in the future.
2-) Better Development
Currently, Ethereum see the highest development activity among other coins apart from BTC. Only Bitcoin can reach the activity Ethereum has in terms of development. So, Ethereum's switching to Proof of Stake will increase the development activity and the system's flaws could easily be improved in the near future. Ethereum's switch will also take the attention of many developers outside the cryptocurrency industry and this is also a positive news.
3-) Staking as a Passive Income
The coronavirus affecting people's views in terms of additional income. As the world are going through unprecedented times, getting additional income via different streams is a priority. And now, people are starting to understand staking is a great way for them to get additional passive income. Ethereum's switch will only accelerate this process. People will start to learn more about staking after Ethereum 2.0 and this is a great thing.
These are exciting times for cryptocurrency industry and the Proof of Stake technology. One of the oldest and biggest actors in this sphere is now joining the bandwagon! As far as price predictions go, many people expect Ethereum to surge 'significantly' after the update. Whether time will tell what will be the price for ETH, one thing for sure: Staking will become more and more important in our lives in the future. We, as MyCointainer, are ready to help you in your staking journey! Stay safe, and all the best luck of your investments!