Here is what to know as Ethereum 2.0 goes live
Ethereum 2.0, the much-anticipated upgrade went live on Tuesday on the Beacon Chain bringing to a conclusion the opening act, or “phase 0,” of the Ethereum consensus mechanism transition.
The upgrade is expected to make several significant improvements to the Ethereum network beginning with the of a proof-of-stake mechanism, which should solve some of the network’s long-standing scalability problems.
The Ethereum community displayed impressive support for the upgrade by staking nearly 900,000 ETH, around 370,000 more than the original requirement of 5524,288. Dubai’s IBC Group, reportedly, staked around 22,000 ETH in support of Ethereum 2.0.
“It’s a great testament to the Ethereum Community,” Vitalik Buterin, founder of Ethereum, said on Tuesday.
While many investors had partly anticipated a price jump following the launch, the price of Ethereum plunged instead of 9 percent. Prior to the launch, Ethereum was trading at a high of $632, however, Ether’s price dropped to lows of $571. As of press time, Ether is trading at $595 on the Coindesk Index.
What is the upgrade all about?
Ethereum 2.0, also known as Eth2 or ‘Serenity’, is the next upgrade to the Ethereum blockchain expected to improve the functionality of Ethereum in different ways. It is expected to benefit the scalability, throughput, and security of the Ethereum public mainnet. Ethereum 2.0 will not eliminate any of the data history, transaction records, or asset ownership of the Ethereum 1.0 chain.
According to a timeline released by the Ethereum Foundation, around 524,288 ETH needed to be pledged with at least 16,384 validators to invoke the proof-of-stake (POS) process. The Proof of State is an upgrade from Ethereum 1.0’s current Proof of Work consensus model and allows for improved security and scalability. POS is a consensus mechanism that relies on validators and staked ETH for the continuation of blocks on the blockchain and is necessary for sharding.
By introducing sharding - the partitioning of large databases into smaller, faster ones hence making the entire system more scalable - Ethereum 2.0 will likely increase efficiency of its resource usage in a big way. This will be achieved by breaking data verification tasks up among sets of nodes and each will be responsible for verifying just the data it received.
A new coin
Usually, when there is an upgrade of a cryptocurrency, the result is a brand new coin. This is also known as a fork. This is not the case with Ethereum 2.0.
It is more like the upgrade of the original digital wallet. In that case, if you own ETH, you will now be required to deposit them in the Ethereum 2.0 deposit contract. It also means that as an investor, you do not need to make any new changes in order to prepare for Ethereum 2.0. You can continue to buy and sell ETH or other currencies that run on Ethereum’s blockchain using your preferred cryptocurrency exchanges.
How it affects price?
As many investors have clearly seen, the Ethereum 2.0 update has little correlation to what happens to the price of ETH. Like other cryptocurrencies, ETH is subject to the laws of demand and supply.
Nevertheless, there is room to be optimistic. The price of Ethereum reached a price milestone in November reaching $600, the highest it has been since June 2018. It is still approximately 59 percent below its 2018 all-time high at $1,431 all-time high. 2.0. Even with the price sitting far below its 2018 record, the second-largest cryptocurrency in the world now has a $67 billion market capitalisation, which trumps the market cap of many Fortune 500 companies.
Experts say much of that growth comes from anticipation over the launch of Ethereum. Anticipation may have led many investors to increase their positions thereby creating surplus demand chasing supply.
The launch on Tuesday will usher in a series of phases, with the first set to roll out on December 1, 2020.