One year after the historic move to proof-of-stake, Ethereum’s energy usage has decreased significantly and network access has improved significantly, however, many technical issues remain the road ahead.
The merger was executed on September 15, 2022, and in this event, the Ethereum mainnet merged with an independent proof-of-stake blockchain called the Beacon Chain.
The most significant improvement in post-merger Ethereum is the dramatic shift from the energy-hungry Proof-of-Work (PoW) consensus mechanism to PoS, which has allowed the Ethereum network to significantly reduce its overall power consumption.
according to data According to data from the Cambridge Center for Alternative Finance, the energy consumption of the Ethereum network has dropped by more than 99.9% from the approximately 21 terawatt hours of electricity used by PoW to run.
Ethereum falls into deflation
In addition to using less electricity, the merger has caused the Ethereum network to become economically deflationary, meaning that more new ether (ETH) is being issued to secure the network than will ever be removed from the supply. Amount of ETH.
According to data from Ethereum data provider Ultrasound moneySince the merger, just over 300,000 ETH (worth $488 million at current prices) has been burned. At the current rate of destruction, the total supply of ETH decreases by 0.25% per year.
While many proponents believe that Ethereum’s price will surge due to renewed deflationary pressures, hopes for a significant increase in Ethereum’s price have been dampened by a series of macroeconomic headwinds, including a banking crisis and a spike in inflation.
Notably, ETH’s growth in the first quarter of this year pales in comparison to growth in the price of Bitcoin (BTC), with the flagship crypto asset appearing to benefit from the traditional financial instability brought about by the banking crisis.
Price action aside, the central theme of the proof-of-stake upgrade is the introduction of stakers to secure the network in place of miners.
The subsequent Shapella upgrade in April 2023 drove a massive shift in ETH to staking. The biggest beneficiaries of this shift are liquidity staking providers such as Lido and Rocket Pool.
Liquid pledge takeover
According to statistics, since the merger, liquidity staking providers have come to dominate the Ethereum landscape, with more than $19.5 billion worth of ETH currently staked through the liquidity staking protocol. data From DeFiLlama.
As of the time of publication, Lido is by far the largest staking provider, accounting for 72% of all staked ETH.
However, while many Ethereum advocates, including Labry CEO Lachlan Feeny, have praised the move to staking for removing the barrier of expensive, complex mining hardware, one of the main concerns about the rise of liquidity staking is the level of control granted to the stake provider, specifically Lido Financial.
“Liquidity staking is ultimately good for the network because it ensures that the governance of the network is not limited to the rich. However, it also creates its own problems,” Feeney told Cointelegraph.
At least five Ethereum liquid staking providers are working to implement the 22% cap rule to ensure the Ethereum network remains decentralized — despite Lido voting not to participate.
related: Analyst: Ethereum active addresses hit second highest ever
It is worth noting that Lido voted Back in June, following a 99.81% majority against self-limiting, Ethereum advocate Superphiz announced that staking providers had “expressed their intention to control a majority of validators on the beacon chain.”
Lido voted against self-restriction with a 99.81% majority. They expressed their intention to control the majority of validators on the beacon chain.https://t.co/T16rTdM3gm
— superphiz.eth️ (@superphiz) August 31, 2023
The move sparked widespread concerns about the potential centralization of Ethereum verification.
“Lido currently controls 32.26% of all staked Ethereum on the network, worth over $14 billion. In the long run, I believe Ethereum is better off with liquid collateral than without, however, there are still many challenges that need to be overcome ,” Feeney concluded.
Feeny also noted that Ethereum’s most pressing near-term concern is growing regulatory pressure on cryptocurrencies and blockchain in the United States.
“Regulators, especially in the United States, currently seem hell-bent on wiping out the U.S. blockchain industry,” he said.
If it becomes too difficult for blockchain companies to operate in the United States, it will be devastating for Ethereum and the global blockchain community. “
Beyond staking, customer diversity also remains a core issue. On September 5, Vitalik Buterin took the stage at Korea Blockchain Week to discuss six key issues that need to be solved to solve the centralization problem.
Currently, the majority of the 5,901 active Ethereum nodes are run through centralized network providers such as Amazon Web Services, which many experts claim leaves the Ethereum blockchain open to centralized points of failure.
Buterin believes that in order for Ethereum to remain decentralized enough in the long term, it will need to be easier for ordinary people to run nodes, which means significantly reducing the costs and hardware requirements for node operators.
Buterin’s main solution is the concept of statelessness, which eliminates dependence on centralized servers by reducing the data requirements of node operators to close to zero.
“Today, running a node requires hundreds of gigabytes of data. With a stateless client, you can run a node with essentially zero overhead.”
While this is Buterin’s most prominent concern about centralization, he explained that it may take another 10 to 20 years for these issues to be resolved.
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