It is built on a technology known as blockchains, which are online ledgers whose transactions are checked and recorded by a decentralised network of computers known as validators.
These validators are incentivised for their work by receiving newly minted bitcoin as rewards, in what is known as mining.
At the heart of the platform is the idea of smart contracts, which are automated agreements that ensure that money and assets change hands when certain conditions have been fulfilled.
The second problem for ethereum is that, as it has become more popular, the amount of computational power used by validators has rocketed.
Bitcoin is currently using as much power as the whole of the Philippines, although its supporters argue that much of this is power that would otherwise be wasted for example, oil rigs burning off natural gas because it’s not profitable to sell it.
Without getting into too many details, proof of work is a protocol in which validators all attempt to solve complex equations to prove that each proposed transaction is valid.
Many in the bitcoin community are against proof of stake because it gives the most power to the biggest validators, potentially allowing them to corrupt the system of validation if they can get control of more than half of the network.
Either way, ethereum 2.0 promises to reduce the platform’s power consumption by 99.9%, making it far more sustainable.
The transition to ethereum 2.0 has been a slow one, riddled with technical issues that have dragged on for over two years.
Assuming this goes ahead as planned, all eyes will be on the merger, and then later another change known as sharding which will greatly increase the system’s processing capability.
But some of the price movement in ether probably reflects people betting that the upgrade will succeed, while the rest is from speculators switching from bitcoin, and new money moving into the space.
In the run-up to the merger of ethereum’s two blockchains, it will be interesting to see how all this affects ether’s price in relation to the so-called eth killers .
But ultimately the question is what it will mean for bitcoin.
The question is whether these advantages are outweighed by ethereum 2.0’s greener credentials and the fact that it can handle more transactions.
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