Today, I am going to outline the important differences between Ethereum 1.0 and 2.0 and discuss a few key aspects you should know if you are considering investing in an Ethereum digital asset.
Ethereum 2.0 is a major upgrade to the Ethereum network, otherwise known as ‘Serenity’ or ETH 2.O. Although Ethereum 2.0 is expected to offer many benefits, it primarily updates the network to improve its safety and capacity., especially when it comes to the digital asset’s ability for transaction or TPS, reduced fee, as well as other updates to create a sustainable network.
The original Ethereum network relied on computationally intensive “proof of work” mining algorithms, which is bad for the environment. Our new Ethereum 2.0 network relies on a mining algorithm called “proof of stake”, which doesn’t rely as much on these computations and is better for the environment.
Mining Ethereum incentivized people with monetary rewards to complete millions of calculations per second in order to keep the network secure.
Benefits of 2.0
ETH 2.0 speeds up processing so transactions are now executed more quickly and cost less. The Ethereum network, like other popular cryptocurrencies, relies on a proof-of-work approach to mining. Proof of stake takes another tack: miners are selected through an algorithm that randomly selects a winning node to process transactions, while also reducing transaction times and fees for the user.
One major hurdle to widespread adoption of cryptocurrencies is environmental concerns, and Ethereum has faced its share.
Mining cryptocurrency requires a high level of energy consumption, which can adversely impact the environment.
According to digiconomist, a website that specializes in exposing the unintended consequences of digital trends, A Bitcoin transaction uses the same amount of power that an average American household consumes in a month.
More specifically, Digiconomist, in its Ethereum energy consumption index, claimed that the annual total electrical energy consumed by Ethereum is approximately 61.17 terawatt-hour or TWH, compared to approximately 68.98 consumed by Bitcoin. In comparison, the electrical energy consumed annually by Ethereum surpasses that of Israel.
The worst part of Ethereum’s environmental impact comes in the form of a carbon footprint. According to Digiconomist, this is an equivalent of 29.05 Million Tonnes (MT) emitted annually.
While speaking to Bloomberg, Vitalik Butterin, the co-founder of Ethereum addressed the recent hard fork activation as a major step towards “creating an energy-efficient ecosystem.”
Furthermore, analysts are pointing to a noticeable reduction of Ethereum network “gas fees” (processing fee charged per transaction) which they claim could lead to less emissions created in the Ethereum blockchain network by 99%.
Following the activation of its London hard fork on Thursday, Ether’s price managed to go past $2,700, its highest since early June, and have continued to climb with the current price hovering around $3,160 as of writing, four days after ETH 2.0 went live.
Major upgrades like “Serenity” will likely increase awareness of the native currency for Ethereum 2.0, resulting in increased activity from investors and miners.
The update to the Ethereum network will also be of significant consequence to Bitcoin and other cryptocurrencies that are built on top of the Ethereum blockchain.
Bitcoin has climbed more than 21% since the activation of ETH 2.0 on Thursday, to currently sit at $45k+, up from $38k before the activation.