Ethereum beyond price: tests, mining and progress in the middle of a historical year

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2022 could be remembered as “the year of the merger” of the current Ethereum blockchain with its new version, Ethereum 2.0. At least that’s how the developers predict it and, meanwhile, goals are being met that bring it closer to this goal.

In order for the transition to be made safely, it is necessary to rehearse the procedures beforehand. For this reason, several test networks have been established that, little by little, are advancing.

Likewise, the new blockchain is preparing to go into operation. Using the proof-of-stake consensus algorithm (Proof-of-Stake or PoS) to mine new blocks also determines a certain preparation before taking that step.

Finally, there is the situation of the miners. Given the the network will change its way of validating new blocks, the once so coveted graphics cards or GPUs will no longer be necessary. This makes the landscape change greatly in Ethereum mining.

Next, we propose to break down these topics and analyze the state of each one. With the first half of the year now over, what has 2022 in store for Ethereum so far?

Testnets, the Ethereum training ground

Ethereum has various testnets, with different characteristics and purposes. In some of these networks, different methods have been tested to merge the current blockchain with the Beacon Chain, the original snippet of the new blockchain with PoS.

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Ethereum beyond price: tests, mining and progress in the middle of a historical year

Kintsugi and Kiln are the two testnets that were initially advanced. The first of them, Kintsugi, was launched in December 2021 as a testing platform for developers. on Ethereum 2.0. In January, he had fork problems that prevented him from working for several days and this prompted a quick search for a replacement.

this is how it came Kiln, which was conceived with the idea of ​​PoW and PoS coexisting in this testnet. This testnet was the successor to Kintsugi and is intended to provide an environment to test how the network behaves after the merge.

Ropsten was the first testnet to complete its merger with the new blockchain on June 8. Also, it is the longest running testnet from the proof-of-work mechanism (proof of work or PoW).

While, on June 20, the Beacon Chain was created in the Sepolia test network, the first fragment of the new blockchain. This opens the way for validators to prepare to participate in the creation of new blocks when the PoS merger takes place.

The latest testnet is Goerli. Like Sepolia, it is pending its merger to a blockchain with PoS. These two networks will be the only ones that will remain open after the merger of the main network with its Beacon Chain, which has also had its technical problems that warn in time what must be corrected before the final merger.

Validators, guardians of Ethereum 2.0

As explained in other CriptoNoticias publications, the PoS method is based on the participation of some validators, who are in charge of validating transactions and creating new blocks. In exchange, they deposit 32 ethers (ETH) as a guarantee that they will act honestly.

In this sense, the Ethereum 2.0 network is in good health. At the time of writing this article, exist more than 404,000 validators who deposited funds to collaborate with the maintenance of the network, either directly or through a staking pool. Moreover, the ETH accumulated by stakers in the Lido pool alone already exceeds the entire value of the Binance network.

graph shows increase in the number of ethereum validators between January and May 2022
The validators in Ethereum 2.0 have not stopped growing since the creation of the Beacon Chain. Source: beaconcha.in

However, that does not mean that everything is already done. Until very recently, Ethereum 2.0 was in “emergency” due to the high degree of centralization of validators. The specific problem was that more than two thirds of them used the same client to connect to the network.

Fortunately, this scenario appears to have been remedied, at least for the time being. However, questions remain about the trust that must be placed in the good faith of validators and staking pools to avoid problems that could seriously compromise the integrity of the entire network.

And what about the miners?

It could be said that the “losers” in this story, if any, are the current Ethereum miners. Is that the step from using PoW to PoS entails that GPU mining rigs will no longer be required to add blocks to the chain and mine new ETH. In Ethereum 2.0, it will be the validators who do it and get rewarded for it.

In this context, miners have two options: migrate to mining another cryptocurrency or sell their equipment and say goodbye to this activity. If we go by the market, many seem to be leaning towards this second alternative.

ethereum mining hashrate chart shows lowest point reached in june 2022
At the end of June, the Ethereum hashrate hit its lowest this year. Font: Minerstat.

With a few months of mining ahead in the second half (at least according to what the developers project), graphics card prices fall due to increased supply, both in the secondary market (used) and in the primary market. This is good news for gamers, who for a long time disputed access to GPUs from brands such as NVidia or AMD with miners.

What to expect for the next semester

The developers announced that the difficulty bomb will run in mid-September. This update will bring a maximum difficulty increase to mine new ETH, thus ending PoW mining on the network.

When that point is reached, trials on the test networks will be complete, allowing for a safe and orderly transition, as envisioned.

However, it is worth mentioning that this process has been repeatedly postponed in recent years. Therefore, it would not be unreasonable to consider that it might not be in September, but later, when the merger finally takes place.

Ultimately, there are also developers who look further and are already thinking of improvements for Ethereum 2.0. About this, Several Improvement Proposals (EIPs) have been submitted by the end of 2022 or directly by 2023. Vitalik Buterin himself has participated in some of them, with the aim that the transition to the new blockchain is just one more step among many that improve the performance of Ethereum in general.

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