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The integration of Ethereum can change the trend of declining popularity of digital currencies

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The integration of Ethereum can change the trend of declining popularity of digital currencies


They have made a decent recovery in the last few months. (ETH), is the second largest cryptocurrency after Bitcoin.

Created by Canadian/Russian programmer Vitalik Buterin, Ether is a digital currency used for transactions on the leading platform on which developers can build applications using blockchain technology.

Blockchains run without the control of any company. Many of these applications revolve around smart contracts, which are automated contracts that eliminate the need for intermediaries such as intermediaries and banks, and have great potential for the future.

One of the main reasons for Ether’s comeback has been the integration of Ethereum, a massive project to change the way blockchain works. Where Ethereum transactions are currently verified using an energy-intensive system called proof-of-work (PoW), where very powerful computers compete to solve complex mathematical equations, a new system was introduced around September 15. will change. As Proof of Stake (PoS).

PoS basically means that transactions on the blockchain are made not by all this computation, but by a network of investors whose commitment is shown by the fact that they have at least 32 Ether (about US$54,000).

The idea is that it gives them an economic incentive to increase network security. While Bitcoin transactions all depend on PoW, many newer cryptocurrencies use PoS, including Ethereum rivals Solana and Cardano.

The greening of the market


When the Ethereum integration is done, the energy consumption in the blockchain will be reduced by 99%.

As a result of this merger, some analysts expect Ether to overtake Bitcoin as the leading cryptocurrency in terms of total coin value. Ether is currently worth just over $204 billion, while Bitcoin is valued at $396 billion.


Bitcoin vs ether Bitcoin vs ethereum


Bitcoin was originally created with the egalitarian goal of allowing investors access to a bankless financial system with money not controlled by countries. The company has been championed for its ability to empower billions of unbanked people to transact online and facilitate things like microfinance and ultra-cheap cross-border trade.

However, Bitcoin has been linked to environmental destruction and criminal activities, including money laundering, online drug dealing, Ponzi schemes, and hacking exchanges.

Netflix documentaries have further reinforced this negative public image. Recent scandals in the crypto world, such as the collapse of rival Ethereum, Luna and the bankruptcy of Celsius and other cryptocurrency lenders

One important consequence has been that large financial institutions such as investment banks and pension funds have been wary of pouring money into this space.

But if the most popular crypto platform successfully switches to PoW in the coming days, many believe it will overcome the biggest institutional objection and see more money pouring into the space (there are already early signs, such as Fidelity’s new crypto fund for retail investors). This is likely to accelerate a global regulatory framework that minimizes undesirable activities.

Although you have to share 32 Ether to become one of the network’s validators, several companies have set up systems for smaller investors to pool their money to participate. For example, Binance, the world’s largest cryptocurrency exchange, offers investors a 6% annual return on shares pooled on Ether.


Ethereum digital currency staking


Therefore, cryptocurrency staking creates a win-win situation with guaranteed returns and a very smooth system that makes it easy for people to move their money in and out of Ether. This increases the attractiveness of Ether and PoS cryptocurrencies in general.

Another one of them is humanitarian aid. For example, when Russia invaded Ukraine, the Ukrainian government asked for donations in Bitcoin and Ether to support its efforts against the invaders. It quickly attracted considerable money.

Ethereum Foundation developers don’t expect the merger to make a big difference in these areas (currently, “gas” fees average between $1 and $4 per transaction, depending on the platform you’re using). Perhaps more important is another change in Ethereum’s journey to “Ethereum 2.0,” called sharding, which is scheduled to happen in 2023.

We also have to wait and see how smooth the integration is. Sync and update bugs can see issues such as validations being disconnected from the blockchain.

But overall, although the merger will not be a miraculous event, it can help improve the image of digital currencies and attract institutional and retail investors.