The Ethereum network, the second-largest blockchain by market cap, will be undergoing an upgrade soon. This hard fork is known as Ethereum 2.0 or Serenity, and it aims to improve the Ethereum network’s functionality. Moving from a Proof-of-Work (PoW) to Proof-of-Stake (PoS) algorithm seeks to improve three key areas: scalability, cost, and sustainability. Let’s take a closer look at what this means for the future of the second-largest blockchain.
What is Ethereum Serenity
Ethereum is an open-source blockchain platform that lets users run smart contracts and decentralized applications (DApps). It also has a native crypto token, Ether (ETH). With Ethereum Serenity, Ethereum will move from a Proof-of-Work blockchain to a new consensus algorithm called Proof-of-Stake.
Will we have to upgrade our wallets?
The upgrade from Proof-of-Work (PoW) to Proof-of-Stake (PoS) won’t require users of Ethereum to upgrade their software. The same goes for DApps built on it, such as Augur, Golem, MakerDAO, or other tokens like Shiba Inu (SHIB). Users will be able to continue using existing Ethereum wallets, including any smart contracts we’ve been able to put in place. We will only need ETH 2.0 on a compatible wallet or exchange platform. Although the process has begun, there is no set date for when Ethereum will entirely switch over to PoS. It could be weeks or months before it happens, but the buzz is that the merge will occur sometime this year.
What are the new features for Ethereum Serenity?
The most important new feature of Ethereum 2.0 is a shift from Proof-of-Work (PoW) to Proof-of-Stake (PoS). While PoW involves expensive, energy-intensive machines competing for a chance to confirm transactions on a blockchain network, PoS uses virtual coin owners as validators. A validator stakes their coins, and they get rewarded for doing so. If a validator tries to cheat, their stake will be slashed, and they’ll lose money. This incentive structure means that PoS blockchains don’t need miners and can process more transactions per second at lower costs. Ethereum 2.0 will also introduce zk-SNARKs (zero-knowledge succinct non-interactive arguments of knowledge). Zk-SNARKS allow users to keep transaction data private while still verifying them on a public ledger.
Is this still a good time to invest in Ether (ETH)?
Like with all crypto, it’s hard to predict precisely how much Ethereum (ETH) will be worth. A good rule to follow is to treat it like gambling at a casino: never invest more than you can afford to lose. The upgrade could increase its value significantly over time, but several factors could slow it down. The U.S. federal government looking into developing a digital dollar could impact all crypto markets. Any new regulations resulting from that same investigation will also determine how the future of crypto looks.
The Ethereum Serenity should lead to more transactions per second at lower costs than Ethereum currently supports. With greater adoption of blockchain technology expected across industries such as healthcare and supply chain management, demand for cryptocurrencies like Ethereum (ETH) may grow as well. Staking will change how we use Ethereum. The change will require people to stake a certain amount of their ETH. The benefits are that those who stake their ETH will earn rewards in an Annual Percentage Yield (APY). The downside is that you won’t have access to your staked ETH.