The cryptocurrency market has been driven to new highs nearly every day over the last 15 months – this has been a rally like never before. Even after a bit of a selloff in the last couple of months, most tokens are still much higher than they were at any point in 2020, and this reflects the general optimism around the sector from most observers and market participants. One of the most interesting tokens to track has been Ethereum, which has continued to be the second-largest cryptocurrency in the world by market cap, behind Bitcoin. Ethereum has also seen a lot of growth in a similar manner to that of the crypto market in general, and in fact, it has dropped by a lot less than Bitcoin, for example, or the market. One of the reasons why there seems to be a lot of excitement around Ethereum is the impending launch of Ethereum 2.0, which is a set of upgrades to the Ethereum blockchain that are currently in progress and would improve the network by leaps and bounds. These upgrades have been in the works since 2014, and would be a major development for the token, and even though they have been delayed, it is still worth considering the impact that this launch will have on the token as well as on the wider crypto market.
The biggest advantage that Ethereum has over Bitcoin is that its blockchain network supports smart contract and decentralized apps – features that have led many analysts to state that Ethereum will eventually overtake Bitcoin as the world’s largest cryptocurrency. It is also why the Ethereum blockchain is the most widely-used blockchain network globally, across industries, and this could increase even more with Ethereum 2.0. As Ether and Ethereum have grown in popularity, the network has gotten more clogged by transactions. Currently, it can handle 15 to 45 transactions per second, which sounds impressive, but is proving not nearly enough to handle all of Ethereum’s users from across the globe. The high demand is also driving up transaction fees. Thus, a big part of Ethereum 2.0 will be making the network more scalable so that more activity can be handled easily, by introducing sharding. Sharding is a concept that will create 64 new chains on the network to spread the load in a much better way. This will essentially take the massive amount of data currently being stored on Ethereum nodes and break it into smaller groups that will be stored on more databases, which will ease pressure on the current system and allow for more transactions per second. Sharding will eventually enable ordinary users to operate Ethereum on a personal device, increasing network participants and making the Ethereum blockchain more decentralized because there will be more users. The more users and the more nodes, the more complex it will become for hackers to take hold of a large part of the network. This is one of the most exciting features of Ethereum 2.0.
Ethereum 2.0 is also planning to move away from the energy-intensive mining of tokens to a process called staking. As the demand for crypto has increased, miners have had to use an incredible amount of computing power and therefore energy to mint new tokens. Sharding will help do away with mining. Instead, Ethereum will turn to staking, a process in which Ether owners store a certain number of tokens away in a crypto wallet on their own personal device, and then use those tokens to validate and forge new Ether tokens. The transition to Ethereum 2.0 could make the network nearly 100% more energy efficient.