💣 Change is Coming for Ethereum! 💸

in cryptocurrency •  2 years ago  (edited)

2018 is a big year for Ethereum. Let’s discuss why.

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Ethereum works based on Proof of Work (POW) which means that you can mine Ethereum and get rewarded Ethereum for mining.

What is a proof-of-work system?

A proof-of-work (PoW) system is an economic security measure implemented to prevent denial of service attacks and other common service abuses like spamming. It is done by requiring the service requester to do some work, usually requiring processing power from a computer.

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The concept was invented by Cynthia Dwork and Moni Naor as presented in a 1993 journal article. The term "Proof of Work" or POW was first coined and formalized in a 1999 paper by Markus Jakobsson and Ari Juels. An early example of the proof-of-work system used to give value to a currency is the shell money of the Solomon Islands. Source

A very important feature of these systems is that they’re asymmetrical. It means the work must be hard enough (but doable) on the client side but easy to verify at the service provider side. This scheme is also called computational puzzle, CPU cost function, CPU pricing function, or client puzzle. It is far different from a CAPTCHA, which is designed for a human to solve quickly, not a computer. The idea of Proof of space (PoS) also apply the same principle by providing proof of a certain amount of memory or disk space instead of CPU processing power. Proof of bandwidth and Proof of ownership (which aims at proving that specific data are in possession of the client) are among other approaches that have been considered in the context of cryptocurrency.

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However, it's going to switch and it's going to end, so there will be no more mining for Ethereum.

It is going to get switched to POS which means Proof of Stake.

Proof of stake is when you stake your Ethereum, and get rewarded Ethereum. Proof-of-stake (PoS) is a kind of system by which the cryptocurrency blockchain network's goal is to achieve distributed consensus. In PoS-based coins, the creator of the next block is chosen via diversified combinations of random selection and wealth (the stake) or age. Proof-of-stake variants of block-selection must have a way of defining the next valid block in any blockchain. Selection by account balance would result in (undesirable) centralization, as the single richest member would have a permanent advantage. Instead, several different methods of selection have been designed.

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Advantages

Proof of Stake currencies are way more energy efficient than Proof of Work systems, which mainly relies on computational power. At a bitcoin mining-farm, energy consumption totaled 240 kWh per bitcoin in 2014 (equivalent to burning 16 US gal or 61 L of gasoline, in terms of carbon footprint). Some have even predicted that Bitcoin will consume half of the world’s electricity several years from now!

Block-generator incentives are also different. Under Proof-of-Work, the generator may not potentially own any of the currency they are mining. The miner’s incentive is only to maximize their own gains. It is undetermined whether this disparity lowers or increases security risks.

In Proof-of-Stake, those "guarding" the coins are always those who own the coins (although several cryptocurrencies do allow or enforce lending the staking power to other nodes).
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So what's going to happen?

The minimum you can stake is 1000ETH, so not many people are going to be able to stake but let's say you're a very wealthy guy who have eight hundred Ethereums. What do can do is buy 200 more Ethereums in order for you to reach that 1000ETH requirement. And so you can stake them. The profit is going to be somewhere around 14% per year. So, many people are going to HODL Ethereum. Pools are going to open so if you hold three or four Ethereums, you can join these staking pools and you can actually get rewarded based on how many Ethereums you have. This project is called Casper. This has been in talks since the beginning of 2017 but it’s going to be implemented this year.Think about this common sense: If there's going to be more people wanting Ethereum because you can steak it. In order for you to get more rewards, all you have to do is just go for more of it. A lot of people are going to buy more. A lot of people are going to hold more and it's going to be worth it to hold it because you’re getting more of it for keeping it. If you had a few bitcoin, knowing that you’ll get more Bitcoin for holding it, you’re going to hold it. - Just the same idea. In that sense, Ethereum is going to naturally rise in price (but this is not financial advice, just my opinion).

Please upvote, resteem and follow me, thank you.

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ETH price will rise if they solve scaling. If they don’t, POS will just temporarily raise the price. About staking, 1000ETH is a lot but this is not problem, probably small investors will stake through pools.

I really hope this development would be for the better and not turn out to drown our dear Eth.

Blockchain Ethereum can be considered a living computer entity because the number of nodes fluctuates continuously. Even though the number of nodes depends on the number of people making their computers available to run the Ethereum network.

One of the particularities of Ethereum is that there are no less than 8 programming languages for coding decentralized applications, or smart contracts. This profusion of implementation makes sure that the protocol is virtuous. This is why Ethereum is so successful because it provides the peer-to-peer network infrastructure, as well as the tools to develop its own Blockchain-based application.

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Nice post

Thanks!

Thanks you too friend

Thanks for sharing!

Interesting, I didn't realise this was coming. Thanks!

Very interesting that it would change from PoW to PoS, in that sense your "prediction" would hold much water and the ones who own Ethereum, will stake more, get more and cash out more in the end (just an opinion). Nevertheless a good and interesting read. Thank you!

I wonder what will happen to those who invested so much money into ETH mining rigs?
If the change to POS take effect, does it mean the circulating supply of ETH will halt?

I think there's gonna be a way to configure those mining rigs to mine another coin.

Ohh Usana Gold Director? @hiroyamagishi? In Japan?
I am aiming for silver director... for quite a while now...

Fantastic post! So many other steemers focus on Bitcoin, Steem itself or lesser known alt coins and Ethereum seems not to show up on my feed.

Working with a Crypto consultancy and mining operation, this is fantastic information that will help us all. Following you now for more of this.

Question: We have made it to 10% of the value of BTC per coin. Where do you see this ratio leveling out this year?

Thanks again!

It's a pleasure. It's hard to tell, but it will probably increase upon implementation. Thanks for reading.

Nice infrmative post.. Where can we mine etherium..? I started mining on a site eobot but usually they did not reward captcha daily and mining is so difficult.. I dont knw much about it mean mining

I'm not into mining either. It's just impractical due to the amount of electricity and computing power used in order to earn significantly.

Yeah i read about it.. Ok thanx dear.. God bless you

really good information given. is there an official time for starting POS by ethereum?

Thanks dear sharing this news..

You're welcome.

Thank you for sharing this news @hiroyamagishi. It's really hard to predict what's going to happen in the future. This is a big change for ethereum world. Sorry for the miners.

You got a 11.01% upvote from @postpromoter courtesy of @hiroyamagishi!

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great post..
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Very Informative! :)