Understanding what will happen when Ethereum goes PoS?

The proposed shift of Ether consensus mechanism from PoW (Proof of Work) to PoS (Proof of Stake) has sparked discussions about its potential effect on ETH prices. This transition has been under consideration since 2018 and is still a topic of debate.

The recent launch of the Beacon Chain in December of last year has only added fuel to the fire of speculation, both in the financial realm and beyond. The PoS system eliminates the need for resource expenditure such as ASICs and electricity for mining blocks. In contrast, the Proof-of-Stake consensus mechanism involves computer users verifying block transactions based on the amount of cryptocurrency they possess.

Vitalik Buterin, the project lead, has been advocating for PoS since the early days of Ethereum, as it offers enhanced security at a lower cost, among other benefits. Despite the shift affecting only the platform’s internal workings, Ethereum reassures HODLers, dApp creators, and regular traders that there is no need for changes or upgrades to their existing ETH. Any change in the coin’s price will depend solely on the new features brought by 2.0. Further, you can visit thebitsoft360.com

New Users Find PoS System Attractive

The current energy consumption of Ethereum amounts to that of a typical household for 2.8 days per transaction. However, the upcoming ETH 2.0 upgrade is predicted to significantly reduce this figure by up to 99.95%. This move towards a more environmentally-friendly cryptocurrency is likely to attract traders, regulators, and influential investors such as Elon Musk who have previously been put off by Bitcoin’s negative impact on the environment. 

In addition to its ‘green’ appeal, ETH 2.0 is the first major cryptocurrency to implement PoS, which offers the added convenience of staking compared to PoW. Unlike mining, which requires expensive hardware and is computationally demanding, staking only requires regular people to hold and lock up their ETH to earn a reward. This feature increases Ethereum’s appeal beyond its current crypto audience, making it more accessible to the broader public.

Scalability means Usability 

For existing users, the projected increase in scalability is the most significant benefit of Ethereum 2.0. Bitcoin’s low transactions per second rate (between 3.3-7 according to research from 2017) has been a significant barrier to its widespread adoption. According to a 2021 report by the Bank of America, Bitcoin’s “complex settlement process” limits its potential, and therefore, the report stated that there was “no good reason to own BTC” apart from its value appreciation potential. This notable improvement in scalability will enhance the user experience by reducing waiting times and increasing the total liquidity of ETH.

Rollout Uncertainty 

Ethereum’s transition from PoW to PoS has been a multi-year process, and the exact timeline for future updates is still uncertain. However, there is a glimmer of hope, as ETH researchers have successfully launched a private “Eth1-Eth2 post-merge test network” in April, indicating that the highly anticipated merge could be ready sooner than expected. Additionally, major platforms such as Coinbase and Binance have already started offering ETH 2.0 staking services, indicating the industry’s confidence that the rollout will experience only minor delays. 

However, there is some concern that a hard fork will be required for ETH following the shift to PoS. In a speech at the Scaling Ethereum Summit, Buterin referred to this as a “post-merge cleanup.” A hard fork can have a significant impact and typically results in high volatility. The Berlin hard fork that occurred earlier this year led to a record high in ETH prices. However, the post-merge fork that will be required following the shift to PoS is expected to be particularly contentious, particularly among high-end miners.

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