Ethereum has come to an end: what will happen to ETH on Ethereum 2.0, and is it ready for it?
According to analytics by Etherscan’s economist Alex Krüger, Ethereum transaction fees from 10 to 12 August reached highs since the summer of 2015, when the coin was launched. A transaction costs about $9.5 and takes at least 15 seconds to confirm. In expert opinion, the main reasons for the extortionate gas price and the outraged audience are high demand and a large number of processed transactions that need to be prioritized in blockchains.
Companies like Forsage were possibly behind “the congestion.” In Buterin’s words, Forsage ranks second in terms of gas consumption on the network.
Ethereum price is around $400, but the demand for the Ethereum transactions is growing exponentially. It (mostly) has to do with the increasing momentum of DeFi (Decentralized Finance). The crypto and protocols related to this environment are often based on the Ethereum algorithm. It means that the network has collected a critical mass of transactions trying to please DeFi users. What happened is what we exactly were warned about: Ethereum cannot keep up with an increase in operations. It threatens to lose a place next to Bitcoin.
Qiao Wang, a former head of product at Messari, believes that the Ethereum Foundation must solve a high commission problem in no time. Otherwise, it can result in the loss of substantial market share, and projects with smart contracts such as Tezos or Cardano may come out on top. In Wang’s opinion, before Ethereum 2.0 enters the market, any project with a high degree of scalability has all the chances to supplant the second-largest cryptocurrency from its pedestal.
At the same time, a solution from the Ethereum Foundation is probably right around the corner. Medalla, the most recent testnet for migration to Ethereum 2.0 (ETH2), was successfully launched in August. ETH2 will run on the Proof-of-Stake consensus protocol and use segmentation. In theory, these two technologies should improve blockchain efficiency by several times. The new algorithm’s complete transition will take at least two years if developers’ assurances are close to the truth.
However, even emergency measures do not change the fact that the scalability problem, discussed by crypto experts (e.g., Riccardo Spagni, one of the creators of Monero), has begun to threaten the ETH status. Moreover, it can affect the full transition to a new protocol, and the network may lose a considerable share of active users. If the number of transactions rises (due to the cumulative effect, it is possible), Ethereum can loudly fall flat on its face and make way for others in a month.
It is also worth considering that in mid-August, the ETH volume received by miners reached 30,700 coins or $12,000,000. It is almost two and a half times more than the usual ~13,000 ETH (2 ETH per block). The level of average income per block, including commissions, approached the indicators before the first halving. At that time, miners got 5 ETH and exceeded income to 3 ETH per block after the first halving.
Basically, we went back to the period from 2015 to 2017 before the first block reward reduction. The entire policy of the Ethereum Foundation has led one of the biggest networks to the congestion, and miners fairly squeeze out of it everything they can against the transition of ETH to PoS.
It is only a matter of time until miners begin to spend all their profits on the market like water and then leave the network. Will it happen? We will know soon enough.
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