Ethereum 2.0 is here, but not real-time cryptography

The new, greener and ultimately much faster Ethereum 2.0 has arrived.

At 2:43 a.m. on Thursday, September 15, the second-largest, and arguably largest, crypto blockchain transitioned to a much more energy-efficient and scalable system of securing, validating, and adding transactions called “ evidence of-“. participation” or point of sale.

Read more: Blockchain Series: What is Ethereum? The Blockchain That Moved Crypto Beyond Money

Seven years of preparation fusion reduced the electricity and pollution bill of Ethereum – which yesterday used as much energy per year as the nation of Chile – by around 99.95%. In doing so, he ended a multi-billion dollar crypto-mining industry second only to Bitcoin.

See also: Can Proof of Stake Solve Crypto’s ESG Problem?

Billed as the “world computer,” Ethereum has added self-executing smart contracts to blockchain technology, transforming it from a bitcoin-style peer-to-peer digital payment currency to a platform that can do it all. , from revolutionizing supply chain management to supporting immutable – immutable – digital identity systems to decentralized finance (DeFi) and enabling faster, cheaper and more secure back-end transactions by financial institutions.

Learn more: DeFi series: what is a smart contract?

Why change?

The Ethereum Foundation’s massive enterprise had two main goals: first, to eliminate the bad reputation that kept many companies and investors concerned about the environmental, social and governance issues of crypto, non-fungible tokens (NFTs) and the very publicized but still unrealized. Web3’s vision of a privacy-centric, metaverse-dominated, tech-less internet.

Read here: Web3: Is there a “there” over there? And if so, where is it?

Second, the foundation hopes that Ethereum 2.0 will eventually become much more scalable, going from around 12-13 transactions per second (TPS) to 100,000, making it much more useful for payments and more or less everything else. .

See: Ethereum 2.0 will not be faster, says Vitalik Buterin. But it will always evolve massively

However, this upgrade won’t happen for at least a year. So for now, most payments and other transaction-intensive uses will either be saddled with high transaction fees that start at several dollars and go up – sometimes very high – from there for a clogged blockchain and slow, or switch to one of Ethereum’s already PoS and much faster competitors like Algorand, Avalanche, Cardano, Polkadot, Polygon, and Solana, collectively known as “Ethereum killers”.

Read also : DeFi series: What are the best DeFi blockchains?

Most decentralized finance and NFT projects are built on Ethereum, but more and more are turning to these alternative blockchains. While the environmental cost of Ethereum was an issue, high transaction costs and slow speeds are even more important factors.

Not ready for Prime Time?

Another reason for the existence and success of Algorand, Avalanche and others is that the move to Ethereum 2.0 took much longer than expected – 2019 was the first target date. This casts a big question mark next to plans to make Ethereum 2.0 scalable enough for payments by 2023 – something the developers have already let slip from the first quarter of 2023 to somewhere in 2023.

Beyond that, any change as big as Ethereum 2.0 will almost inevitably come with some issues that need to be resolved, which means that many projects – and especially financial ones – will wait until the issues are resolved.

Additionally, questions remain as to whether Ethereum 2.0 will ever be the blockchain for payments.

One of the biggest selling points for blockchain payments is the potential for real-time payments and settlements. And that, even according to Ethereum lead creator Vitalik Buterin, is something that Ethereum 2.0 won’t really have for the foreseeable future. That’s because that 12-13 second TPS also comes with a “block time” of around 14 seconds, which means the time between adding a new block of transactions is added to the immutable blockchain. And since it takes about five more blocks before a transaction is truly considered complete, that means Ethereum 2.0 will still have a completion time of around one minute.

And while that’s far better than Bitcoin’s 10-minute blockchains and hour-long finality, many Ethereum killers do it in a tiny fraction of a second, which means they can actually compete with FedNow’s clearing house and real-time payment capability.

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