2023: A Good Year To Become An Ethereum Holder
Ethereum towards a Proof of Stake consensus. Everything that Proof of Work implies for Ethereum and why it will move to Proof of Stake in 2023, as well as its impact on the price.
In March 2022, Ethereum grew much more than Bitcoin. While the king of cryptocurrencies grew by only 4.71%, Ethereum had a growth of 17.50%, as can be seen on CoinMarketCap. Ethereum’s growth in that period is almost four times the performance of Bitcoin.
All this speculation about the value of Ether is taking place against the backdrop of Ethereum’s move from the Main Chain to the Beacon Chain.
This article will explain what Ethereum’s move from Proof of Work to Proof of Stake is about to do.
Overcoming the Proof of Stake model
The move from the old consensus protocol Proof of Work to Proof of Stake has been mooted since 2017, but it wasn’t until 2020 when the Beacon Chain, a parallel layer to Ethereum’s Main Chain, emerged where the Proof of Stake (PoS) model started to be tested.
The Proof of Work (PoW) is the first consensus protocol that cryptocurrencies had. It emerged with Bitcoin and has been used with Ethereum since the creation of this Blockchain.
In the PoW model, computational power is used to solve complex mathematical operations and thus earn the right to validate a block, obtaining a reward. This process is called mining, and the people and devices that validate the transactions are called miners.
Despite being extremely novel and focusing on decentralization, the PoW consensus protocol produces several problems, such as a shortage of computer graphics cards and greater use of electrical energy, which contributes to the deterioration of the environment by increasing carbon emissions.
According to information from the Digiconomist portal, Ethereum’s network has an annualized consumption of 107 TW/h by April 2022, consuming as much electricity as Kazakhstan, a country of 20 million people in Central Asia, or a third of what Spain, which has almost 50 million inhabitants, consumes.
Another downside of PoW on Ethereum is that the fees to participate in the network are quite high, even though according to Ethereum’s Gastracker they are lower than in much of 2020 and 2021. This means that buying cryptocurrencies through the Ethereum network has lower fees.
That’s why The Merge is planned in the coming months: a merger of the main chain and the beacon chain with a move to PoS. If you want to have a slightly different cryptocurrency, you can swap ETH to SOL. There you will find a brief overview of cryptocurrency and everything you need to know to buy dollars, euros, or other national currencies.
The Merge: bridging two layers
The Merge, the process in which the Beacon Chain will finally join the Main Chain, and the PoW consensus protocol will be abandoned in favor of PoS, is planned for mid-2023.
In a network validated through Proof of Stake, no absurd amounts of electrical power are spent to process blocks. In the new Ethereum, the miner is replaced by the validator: a user or group of users who stack a minimum of 32 Ethers to become the validator of the network and process transactions from a single computer, instead of using a large number of computers.
In return, you get performance in Ethers, which you can dispose of as you wish. The switch to PoS will also have a positive impact on power usage, as according to EthMerge.com, moving away from the PoW protocol will save up to 99% of the energy previously used to mine blocks.
In addition, 66% of validators will need to approve a transaction for it to be validated on the network, up from the previous 51%, bringing more security to the network. It will also reduce network saturation, making the exchange of cryptocurrencies through decentralized platforms such as Uniswap happen faster.
Is a $10,000 per Ether scenario possible in 2023?
Around Ethereum, there is a lot of FOMO or fear of missing the opportunity. This has driven the price per unit of Ether up, and it is not expected to go down in the short term. However, many people are asking: Will Ethereum reach five figures by 2022?
No one has the answer, but at the moment Ether is a long way from that goal. There is no doubt that the move from PoW to PoS will increase the price of Ether in the medium to long term, but no one knows if that $10,000 is just around the corner by the end of 2023, or if there is much more adoption to come. It is best to invest with caution.