Ethereum has long and deservedly taken the second place in terms of capitalization after bitcoin. But this fall, he will begin the transition to POS-Mining, which will completely change this cryptocurrency.
In the article we will look at the history of the creation of Ethereum, how it will change in the near future and what this will lead to.
Ethereum history
The author of the Ethereum cryptocurrency idea is Vitaly Buterin, who in 2013 offered the blockchain platform of the new generation Bitcoin 2.0, where users can create and launch smart contracts and decentralized applications. In order to implement his plans, Buterin gathers a team of like-minded people and collects money using crowdfunding in the second half of 2014. In total, it was possible to assemble 31 591 BTC for the development of ethereum, which at that time was 18 million. The launch of the etrium took place in July 2015, and in March 2016, the platform was upgraded to a stable version.
An important point in the history of Ethereum is the separation of the chain as a result of the hardforka network in the summer of 2016. In June, an ICO DAO was held on the basis of ethereum, the idea of which was to develop a platform for automatic investment management. A total of $ 100 million was collected at ETH, but due to an error in the smart contract of the project, more than half of this amount was stolen by an unknown hacker. The stolen money was found and transferred to a blocked account, but it was impossible to return them to investors without a hardfork network. Thus, with the support of Vitalik Buterin and the majority of the Ethereum community, the blockchain was rolled back until the theft of money and launched a mechanism to return funds to DAO investors. But some of the users of the ethereum did not support the idea of hard forks in order to satisfy the financial interests of a particular group of people and continued to use the original blockchain, calling their project Ethereum Classic.
An important test for ethereum was the appearance of cryptochosis in December 2017. This simple breeding game for unique kittens on the blockchain turned out to be so popular that the network did not cope with a sharp increase in the number of transactions, and the transfer fee flew from 0,2 $ to 4 $. The popularity of cryptococal quickly ended and the network returned to normal operation. But in July, 2018, a ethereal spam attack was launched on ethereum. According to Vitalik Buterin's estimates, the cost of this attack was $ 15 million, and at its peak, the size of the transaction fee jumped to $ 5.
These events indicate that Ethereum has serious scalability issues. They can be solved this fall, when the transition to the Casper protocol and the implementation of sharding technology begins.
Casper and sharding
How did Buterin and the company plan to solve the blockchain scalability problem?
To begin with, the transition to mining using the “proof of ownership” algorithm, called Proof-of-Stake or abbreviated POS mining, will be carried out. According to this algorithm, transactions are confirmed by those who already own a cryptocurrency and do not need powerful equipment to create a new block. Such mining is also called forging.
The developers of ethereum initially planned to switch to POS mining, and for this purpose, the cryptocurrency code laid a “bomb of complexity” - a software limitation, which over time would make ordinary mining unprofitable. The transition to forging is scheduled for autumn 2018 of the year, for which a hardfork called Casper is planned to be held online. This process will be gradual and at first Ethereum will work on a hybrid mining, which will combine the work according to the classic Proof-of-Work algorithm and the new Proof-of-Stake. In this case, the reward of ordinary miners will be reduced five times to 0,6 ETH per block.
After the update, Casper in Ethereum will implement sharding technology, which is a network of many blockchains. Each segment of such a network processes transactions independently, thus it is possible to increase the total throughput several times. At the same time, separate blockchains are synchronized with each other, which allows you to send funds from one network to another. And in the case of an attempt to break into one of the blockchains, other networks will block the changes made by the hacker and restore the correct data. Vitaly Buterin stated that the successful application of sharding technology will allow Ethereum to be brought to the same level with the Visa payment system.
How to change ethereum
The implementation of the stated updates of the etririum will change it beyond recognition and this is guaranteed to have its consequences.
The transition to a hybrid mining algorithm will not please those who are already mining ETH using their own mining farms. The likely development of events will be the switching of part of the miners to the mining of another cryptocurrency, and most likely it will be Ethereum Classic. How much the hash rate will fall because of this and how difficult the Ethereum network security will be to estimate. But the developers expect to compensate for the difference in security due to POS mining.
But if the users of Ethereum Classic, who, by the way, refused to switch to forging, are just waiting for the launch of the Casper update. EOS cryptocurrency is time to start worrying, because the updated ethereum will work on a similar principle, but will offer a significantly higher level of decentralization. Previously, on the side of the EOS project, there was a high transaction rate, and the strength of Ethereum was a large number of users. That updated ethereum should work at no lower speed, which means its users will not need to look for a faster and more scalable blockchain.
Prospects for Ethereum
The implementation of the plans of the team of Vitalik Buterin will bring Ethereum to a new level of technological development. This will strengthen its position as the top 2 cryptocurrency and the most popular blockchain for smart contracts and ICO.
But this way is unlikely to be easy, because problems with errors in the code, the emergence of new branches of the blockchain, and unfair play by competitors cannot be ruled out. We are talking about possible spam attacks and fake news.
Buterin and the team of developers of the etrium passed the point of no return, when it was too late to give up their words. And the future of Ethereum depends on how much their plans coincide with reality.