4th May 2022 > > Ethereum 2.0.

tl;dr

ETH 2.0 is now expected to go live in Q3 2022.

Market Snap (at time of writing)

Market Wrap

Leveraged shorts are increasing once again.

Curious Cryptos’ Commentary – Ethereum 2.0

Progress towards ETH 2.0 has been surprisingly smooth, with most deadlines so far met on time, give or take.

The key benefit of ETH 2.0 is a move away from proof-of-work (POW) to proof-of-stake (POS) which will certainly ease the criticism that POW networks endure from those who claim the environmental costs are too big to justify. As always, there is an ongoing debate about that point of view which I do not intend to get into right now, or at all to be frank. After all, I have Dominic who can do that on my behalf …

There is also an ongoing debate that POW is both more secure and – crucially - more decentralised than POS, decentralisation being the whole point about blockchain tech and cryptos. I think having a detailed conversation about this topic is beyond my understanding and knowledge, but it is worth being aware that there are conflicting views which may or may not get resolved over time.

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The next big step towards ETH 2.0 is “The Merge”.

This is the moment when the new chain takes over the old and starts processing real, live transactions. Combined with sharding – essentially a Layer 2 solution applied directly within Layer 1 – the expectation is ETH 2.0 will be much faster with multiple blocks on different shards being produced at the same time, will have much greater throughput as measured by Transactions per Second (TPS) and will be significantly cheaper. Paying 10s of dollars for a simple transfer, and hundreds or thousands of dollars for complex decentralised finance (DeFi) as is the current situation is simply not sustainable.

The Merge has been going through a test stage, and unsurprisingly some problems have been identified. As a result, just recently the Ethereum Foundation delayed the expected date for The Merge. Tim Beiko, a developer for the Foundation said this:

“It won’t be June, but likely in the few months after.”

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This raises the possibility of “The Bomb” problem.

For those that do not know, The Bomb was a deliberate insertion into the code for ETH that will slow down block times, which currently average 13 seconds (as compared to 10 minutes for BTC for example). The purpose of The Bomb is to ensure that current POW miners stop creating new blocks on the old chain to prevent the emergence of another Ethereum alongside the current one and ETC (Ethereum Classic).

The Bomb is currently programmed to start working in just a few weeks’ time which is going to cause disruption to the Ethereum network. There has been discussion about another hard fork to delay The Bomb, but I think that idea has been put to bed, not least because the hard fork suggestion does not have the support of Vitalik Buterin:

“We have to evaluate the pain of doing an extra delay hard fork versus the pain of living with 21 or 25 second blocks for a while, which is something we have done and the world didn't end.

"Ultimately this is the last time the block time is going to be anything other than 12 seconds."

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One should expect higher ETH fees over the next couple of months at least.