Ethereum 2.0 Draws Closer with Altair Upgrade
VYSYN Ventures Weekly Insights #72 — Another milestone achieved as Proof-of-Stake consensus mechanism move closer
Ethereum, the second-largest cryptocurrency by market capitalization achieved another major milestone on October 27th, 2021. The implementation of Ethereum Altair, an upgrade on the Beacon chain, which was launched in December 2020, is a major step in the network’s transition from a Proof-of-Work (PoW) to a Proof-of-Stake (PoS) consensus algorithm.
The full upgrade to the PoS algorithm, termed Ethereum 2.0, is expected to be fully implemented sometime in 2022. The process began in December 2020, and significant changes have been observed since then regarding Ethereum network operations.
In the latest VYSYN Release, we highlight the changes that have occurred on the network since the launch of Ethereum 2.0. We also examine the effects of the Altair upgrade, and how it will affect the network going forward.
Altair upgrade a significant step towards Ethereum 2.0
The primary objectives of the upgrade are to improve network scalability, security, and sustainability. It also paves the way for Ethereum 2.0. The new network will eliminate the need for miners, and members that stake their coins will become Network Validators. Validation will involve prioritizing users based on how much ETH they have staked on the network and for how long. To achieve this, multiple teams across the network’s ecosystem began upgrading nodes on the network, working on a fixed timeline.
The first step was the launch of the Beacon chain on December 1st, 2020. It marked the introduction of staking on the Ethereum network, albeit on a separate blockchain from the mainnet. The chains will be merged in the future when the network will fully migrate from a PoW to the new PoS consensus algorithm. The Ethereum Altair update was executed successfully, with 95% of the validators participating. It is expected that the remaining validators will update their nodes in the near future.
Optimizing the Beacon chain is a crucial step in the process. It prepares the Ethereum network for Shard chains, which will play a key role in the scalability of the Ethereum network. Shard chains will decongest the network by creating 64 different blockchains that work together to process transactions.
With the Altair upgrade, developers will now be able to build less bulky full node software on the Beacon chain. These nodes, known as light clients, will be used to validate blocks and the transactions in them. The light clients will not need to constantly sync with the full blockchain, paving the way for easier interaction with the network. In addition, inactive users will be charged penalties that will reduce their rewards. Thus, validators will have to keep their nodes constantly online and updated.
This upgrade also provides the opportunity for the Ethereum community to test-run upgrades on the Beacon chain ahead of the merge. It ensures that the network can be upgraded without complications ahead of the complete transition in 2022.
Ethereum aims for deflationary status
The previous upgrade to the Ethereum network took place in August 2021, and was titled Ethereum London, or the London hard fork. The most notable change involved in this upgrade was the Ethereum improvement proposal, EIP-1559, also called the fee burning mechanism. This proposal aims to reduce the rate of monetary expansion of Ethereum, to achieve a deflationary cryptocurrency in the future.
The change introduced by Ethereum London reduces the reward for miners and improves network scalability. The original Ethereum network processes 30 transactions per second. When fully implemented, Ethereum 2.0 promises a processing speed of 100,000 transactions per second.
(Source: Blockchair.com)
Unlike the London hard fork, Ethereum Altair does not bring any drastic changes that affect users. It is a reassuring step for the community and Ethereum users are optimistic that the lingering problems in the network are gradually fading away. Since the previous upgrade, over $2 billion worth of Ethereum has been removed from circulation through the fee-burning mechanism. At the current burning rate, Ethereum will become a deflationary cryptocurrency by 2023.
This is seen by many users as a driver of price growth. We may not be there yet, but thanks to past successes in the implementation of upgrades, expectations are high. This is reflected in the bullish sentiment that has seen Ethereum hover around the $4,000 level. The asset may be lining to surpass the existing all-time high (ATH) price of $4,380.
About VYSYN Ventures
VYSYN Ventures is a longstanding venture capital company that specializes in funding and supporting disruptive startups in the blockchain and cryptocurrency industry. We have provided early-stage support to several projects that have grown to USD market capitalizations of hundreds of millions and even billions. Our incubation program focuses on providing capital allocations, versatile marketing support, and tech assistance.
