The Network Overhaul May Delay The “Difficulty Bomb” Which Will Happen In Line With Transitioning To ETH 2.0

Ethereum’s importance in the crypto sector has been rapidly increasing since decentralized finance (DeFi) and non-fungible tokens (NFTs) became among the most trending words in the crypto world.

Ethereum developers are constantly looking to improve the network and get it ready for a transition in its consensus mechanism and upgrade the current costly Proof-of-work transaction validation system to a much more efficient Proof-of-Stake system.

However, for a smooth transition, a number of upgrades have to be first deployed on the master chain. One of them is the newly-announced Arrow Glacier upgrade, scheduled for block 13,773,000, which is expected on December 8, 2021.

Arrow Glacier would effectively push the difficulty bomb -  a rapid increase in the amount of computing power needed for validating a transaction, from December 2021 to June 2022, when ETH 2.0 is expected to go live. The difficulty bomb aims to make any mining on Ethereum’s mainnet completely useless by expanding the gap between electricity costs and rewards immensely.

Ethereum core developer Tim Beiko emphasized that “we do not need to "wait" for the difficulty bomb to go off in order to transition Ethereum to proof of stake.”

“Similarly, if we encountered issues with the transition, we could decide to push back the bomb once more. Hopefully, this is the last time the difficulty bomb is delayed before Ethereum's transition to proof of stake” Beiko added.

Furthermore, Beiko uncovered that his team is working on deploying a third devnet – Kintsugi, which can also be considered as a first try for a full ETH 2.0 implementation before teams finalize testing and prepare for mainnet launch.

Ethereum developers are also preparing to push another update, codename EIP-4488, which will fix any issues prior to the transition, mainly in the way Ethereum clients connect to the network and retrieve information from it.

Meanwhile, yet another surprise may be heading for Ethereum owners, as data from Glassnode shows that Ethereum balance on exchanges has dropped to a three-year low of just 14 million ETH.

The low number of ETH on exchanges means more and more users are either using their coins on the Ethereum network or holding them, which further boosts Ethereum’s price due to the scarcity effect.

However, the main factor behind Ethereum’s three-year low in terms of exchange balances may be due to the aforementioned DeFi and NFT boom. Some experts even predict that Ethereum could eventually surpass Bitcoin in market capitalization since NFTs and Metaverse projects attract not only Ethereum-focused customers but also people outside of the crypto sector.

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