Ethereum (ETH), the crypto industry’s largest smart contract network, is busy solving the high transaction fee issues. This includes a switch to the Proof-of-Stake (PoS) protocol, better known as the switch to Ethereum 2.0. More and more investors have confidence in that network. This is evident from the amount of ETH that is locked into the ETH 2.0 contract.
At the moment, Ethereum is still a Proof-of-Work (PoW) blockchain. This means that ethereum miners process transactions by performing difficult calculations. The problem with this is that the network is difficult to scale and that transaction costs skyrocket at peak times. This slows down the network and causes congestion on the network.
The first steps towards ETH 2.0, where miners will no longer be needed, have already been taken. The new network actually launched in December 2020 with the Beacon Chain. An ETH holder can become a validator if 32 ETH is locked into the deposit contract. For the launch of the Beacon Chain, at least 524,000 ETH had to be secured in this contract. That threshold did not seem to be reached at first, but recently things have been going really fast.
At the beginning of this month, there was still 5.2 million ethereum in the contract. Almost a month later, the counter stands at 5.9 million. That is 5.08% of the total ETH stock. This means that there are now 175,862 validators. An important point is that the investors will not be able to access their ETH again until phase 1.5. This therefore shows great confidence in the update among investors.
It is unclear when the Ethereum 1.0 and Ethereum 2.0 will finally merge and the transition will be complete. More clarity about this may be forthcoming in the coming months and perhaps even next year. Meanwhile, the developers are working hard to come up with solutions in the meantime to deal with the crowds. For example, the London update was recently launched on the testnet. This update should make transaction costs more predictable and therefore cheaper.