Ethereum is the world’s second largest cryptocurrency and it is giving bitcoin a run for its money.
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EthereumThe second largest cryptocurrency by market value, has just run a final dress rehearsal before a years-awaited upgrade, widely considered one of the most significant events in crypto history.
Since its creation nearly a decade ago, ethereum has been mined through a model known as proof-of-work. It involves complex mathematical equations that large numbers of machines race to solve, and it requires an abundant source of energy. Bitcoin extraction by a similar process.
Ethereum has been working on transitioning to a new model for network security known as proof of stake. Instead of relying on energy-intensive mining, the new method requires users to leverage their existing ether cache as a means of verifying transactions and minting tokens. It uses less energy and is expected to translate into faster transactions.
The final test takes place around 9:45 p.m. ET Wednesday.
Ansgar Dietrichs, a researcher with the Ethereum Foundation, said in a tweet that the most relevant indicator for achieving success when it comes to exhaustion periods like this is looking at time to completion. He called it “another successful experiment.”
A research associate from Galaxy Digital pointed out that the post-merger engagement rate dropped and there appeared to be an issue with one of the customers – but overall, it worked.
“Successful merge = string terminated,” Christine Kim wrote in a tweetadded that we might have had similar kinds of problems with the mainnet upgrade, “but the point is that Merge worked.”
Time of The upgrade will be discussed at the ethereum core developers meeting on Thursday. Previous instructions indicated that merging will come into effect in mid-September.
Ethereum’s transition has been consistently pushed back over the past few years. The core developers told CNBC that the consolidation process was slow, leaving enough time for research, development, and implementation.
Price of ether, a token derived from the ethereum blockchain, has rallied in the last month, up nearly 80%, including a 10% increase in the past 24 hours to around $1,875. However, it is still down by about half this year.
This is what happened
One of ethereum’s testnets, or testnets, called Goerli (named for a train station in Berlin), simulated a process identical to what the mainnet, or mainnet, has, will take effect in September.
The testnet allows developers to try new things and make necessary tweaks before the updates are deployed on the main blockchain. Wednesday night’s exercise showed that the proof-of-stake validation process significantly reduces the energy required to verify a block of transactions, while also demonstrating that the merger process works.
“Goerli has this badge of a bottom-up experimental network,” Josef Je, a developer who worked with the Ethereum Foundation and now runs a permissionless peer-to-peer lending platform called PWN.
Je added that it is the most used testnet at the moment – and proof of stake on Goerli would be akin to how things would run on the mainnet.
The Ethereum Foundation blog echoes that review, stating that Goerli is “the closest network to the mainnet, which can be useful for testing smart contract interactions.”
Detect errors
Tim Beiko, coordinator of the developers of the ethereum protocol, told CNBC that they usually know “within minutes” whether a test has been successful. But they will still find many potential configuration issues in the coming hours and days so they can quickly fix them.
“We want to see the network mature and have a high engagement rate among validators and also make sure we don’t run into any unexpected bugs or issues,” Beiko said.
The easiest metric to track is engagement rate, meaning how many validators are online and performing their tasks, says Beiko. If the number drops, developers will have to figure out why.
Another important issue concerns trading. Ethereum processes transactions in groups called blocks. Beiko said a clear indicator that the test will go well if the blocks have actual transactions in them and are not empty.
The last important check is whether the network is maturing, meaning more than 2/3 of the validators are online and agree with the same view on chain history. Beiko says it takes 15 minutes under normal network conditions.
“If those three things look good, then there’s a long list of extra things to check, but at that point, everything is going well,” Beiko said.
‘More accessible’
As of December 2020, the ethereum community has been testing proof-of-stake workflows on a chain called a beacon, which runs alongside an existing proof-of-work chain. Beacon solved several key problems.
Beiko said the initial proposal required validators to have 1,500 ether, a stake currently worth about $2.7 million, to use the system. The new proof-of-stake proposal lowers the payout, asking interested users to have only 32 ether, or about $57,600.
“It’s still not a trivial amount, but it’s a much more accessible system,” says Beiko.
There were other important developments leading up to Wednesday’s test. In June, ethereum’s longest-running testnet, called Ropsten, successfully merged the proof-of-work execution layer with the proof-of-stake signaling chain. This is the first dry run of the process the mainnet will go through next month, all going according to plan.
Beiko said that the testing of the fusion has allowed developers to ensure that the software running the ethereum protocol is stable and that “everything built on the network is ready for migration.”
