What’s the performance of virtual currency?
The world’s second-largest virtual currency ether by market value has seen a 350% rise since the start of 2020. Last week, the currency has briefly crossed $600 for the first time since June 2018 before going down to again touch the same level this week. However, it is still a long way off from its peak of Rs 88,125 which it touched on 12th Jan 2018. Ethereum has a market cap of 70 billion USD compared to Bitcoin's 360 billion USD.
What’s new?
Ethereum 2.0, also known as Eth2 or simply ‘Serenity’ is an upgrade to the Ethereum blockchain. Those invested in ether are waiting for the upgrade to its underlying network known as Ethereum 2.0, which is aimed towards making the blockchhain faster and more secure. One of the key challenges with the Ethereum blockchain today has been scalability. For instance in 2017, the popularity of an Ethereum-based game called CryptoKitties caused the network to become heavily congested, significantly slowing trade. As per experts, the upgrade will allow thousands more transactions to take place every second. Meanwhile, this may also cause further adoption of ether as well as price appreciation.
Ethereum 2.0 will move from the proof of work system to ‘proof of stake.’
What happens in 'Proof of stake system'?
Under this new system, entities to validate the blockchain will be chosen by ‘staking.’ Instead of solving puzzles, those who hold larger quantities of ether and hold it for long periods will have a higher chance of getting selected as validators and hence generating fees from the validation. Those with 32 ETH (ether) can offer to stake, a process that currently locks up one's money for 1-1.5 years.
What are the benefits of the new system?
The shift to Ethereum 2.0 starting from now is expected to take 2-3 years, as per experts. One of the benefts include the reduction in the cost per transaction, charged by miners/validators. The new system will allow ordinary people to earn some returns on their ethereum by participating in this new process of validation theough staking.
In case of ethereum, this particular technological platform will allow smart contracts to be built, for example loan agreements. Such contracts can be created by computer code without the intervention of courts or legal authorities and execute themselves (for instance, by automatically seizing collateral).