Why This One Change to Ethereum Could Alter Cryptocurrencies Forever

SPONSORED POST*

As one of the most popular cryptocurrencies, the rise of Ethereum (ETH) has been entertaining to watch over recent years, especially for investors.

However, since this year’s crypto crash, the coin has struggled, like many others, to maintain its success.

The thinkers behind ETH have big plans in the pipeline that could jump-start another rise, but there may also be big consequences.

Ethereum’s success to date 

Bitcoin has, of course, dominated the cryptocurrency scene since its inception back in 2009. As the original cyber coin, it’s worth the most, has the most uses, and is generally held up as the pioneering digital currency.

Ethereum, however, probably makes the best case for a runner-up, or chief altcoin, if you prefer. It’s the preferred digital currency that powers the world of smart contracts, and the NFTs that are built on them, while it also has multiple uses in the retail and entertainment world. Let’s say you fancy a spin on a virtual slot game. Ethereum-friendly casinos are a popular alternative to PayPal casinos, for example, or any other type of online casino that normally accepts fiat currencies. People can even book flights with ETH or pay for takeaways.

Yet despite Ethereum’s mainstream success, which has also attracted investment from big financial firms along the way, 2022’s crypto crash has given many investors a severe case of the jitters.

So much so that its engineers are planning a drastic course of action to jump-start the coin and get it back on track.

Switching off the rigs

 Until now, both Bitcoin and Ethereum have operated along the proof-of-work mining system to generate new coins. Using huge amounts of energy, they’ve received a lot of bad press for being horrible for the environment, and this has caused a dip in popularity.

The people behind ETH have been planning to drop it for some time and replace it with a much more energy-efficient proof-of-stake (POS). The existing Eth2 system, for example, has been around for some time as a separate entity, but this has caused conflict between the two.

The solution? To merge the two so that the entire system becomes the more energy-friendly POS version.

At the time of writing, the big event will happen on 15TH September. This will involve ‘switching off the rigs’ in the POW system and going forward under a united banner.

While this might be delayed, there’s one thing we do know: that it’s going to happen one way or another. And soon.

What happens next?

The big event will go one of two ways: everything continues as usual, except the carbon emissions of the ETH ecosystem will drop dramatically overnight. Bitcoin will then be the only coin left on the destructive POW concept.

But it’s a big risk. The switch could throw some of the largest institutions in the ETH industry into disarray and may even cause a war between the system’s old and new worlds. This would have dire consequences, and nobody knows how long it would take to recover, if at all. It is, after all, the first time it’s ever happened.

Part of the reason for potential chaos could be Ethereum ‘forks’ that literally act as spokes in the system’s wheel. These would be created by enthusiasts in an attempt to keep the POW system alive and would hinder the new system’s functions. We can see Bitcoin’s equivalents in Bitcoin Cash and Bitcoin Gold: alternative versions, or ‘hard forks’, created to back up the original.

But these forks would have a fight on their hands thanks to stubborn ETH miners. After ploughing years of work into the system, they can’t afford to see it fail now, because they have valuable assets tied up in it.

From Day 0 of the switch, they’ll be fighting tooth and nail for the new POS system, and many expect them to succeed. 

A new world for ETH users 

The day after the big switch, ETH users will wake up to find they have two balances, one on each type of blockchain. If they have a smart contract, they’ll find they now have two, plus there’ll be both POW and POS versions of NFTs.

While many of these may coexist peacefully, there’s a big chance that conflict will arise. Original NFTs, for example, may lose value due to there being an unofficial version around which buyers can pay much less for. Confusion amongst everyday users may lead to a drop-off in ETH usage, too.

Furthermore, many people may be put off by the fact that the new system potentially means less decentralisation. Dino (decentralization in name only) is a very real fear among POW purists who believe that the nature of the POS system will see power of the network handed over to those with the most money, or financial institutions as some might call them.

This would obviously threaten one of the core principles and selling points of crypto and might sound the death knell for digital currencies in general.

As worrying as this is for crypto enthusiasts, it does look like a brave new world with unexplored opportunities is in store for them. Whether that will include Ethereum, though, is another matter.

*This article has been paid. The Cryptonomist didn’t write the article nor has tested the platform.