Ethereum Races Clock to Collect Enough Coins for Big Upgrade
(Bloomberg) - Ethereum, the world's most actively used blockchain, is nearing its deadline to convince users to pledge enough digital currency to enable a network upgrade that can handle a similar number of transactions as Mastercard Inc. and Visa Inc.
Since Ethereum went live in 2015, Ethereum has relied on an energy-intensive and slow method to ensure that the computers on its network agree on the current status of its digital ledger. The developers of Ethereum have been working for years to switch to a system that instead uses a pooled amount of the digital currency Ether to secure the network and reach consensus faster.
Known as proof of use, at least 524,288 ethers must be tied to a deposit agreement by November 24th so that Ethereum can begin the upgrade. In this case, the changes will automatically take effect from December 1st. By Monday, about 72% of this amount or 376,544 ethers had been deposited. The upgrade also has the potential to reduce the overall supply of ether, which could put the price under pressure.
"Ethereum must scale to become a global substrate of the clearing and settlement layer," said Andrew Keys, executive member of Darma Capital and one of the early contributors to Ethereum application incubator ConsenSys. The current version of Ethereum has proven that gold, currencies, music and other real objects can be successfully digitized, he said. "Now it has to be able to handle global volume."
Ethereum has a wide following for its promise to create an alternative financial sector and an internet that eliminates middlemen. This is because transactions are processed by computer programs called smart contracts, and not by companies. It also has the potential to streamline back office transactions for industries like banking, cross-border payments, and supply chains, which could save businesses millions. However, the slowness of the network has held it back and is a driver for the shift to evidence of deployment.
It can be difficult to update a technology that is used by thousands of people every day, said Aaron Brown, a cryptocurrency investor who also writes for Bloomberg Opinion. "This is a symptom of a more general problem. With successful crypto, it's incredibly difficult to even make routine technical fixes, let alone major transitions."
Further information: On the big plans for ether, the "other" cryptocurrency (podcast)
The plan to put Ether comes from the fact that the prices for cryptocurrencies are rising again. Bitcoin has more than doubled to around $ 18,400 this year. That's a high, hit in late 2017, when it approached $ 20,000, according to Bloomberg data. Ether has more than quadrupled to around $ 600. Bitcoin, like the current version of Ethereum, uses proof of work to achieve network consensus.
The upgrade of Ethereum to prove the use takes place in at least three phases. The first, which begins as soon as the 524,288 ethers are deposited, allows those who have used Ether to process transactions and earn rewards. The next one will split the new Ethereum network into 64 separate blockchains to allow transactions to be processed faster.
Kyle Samani, co-founder of Multicoin Capital, said he was "skeptical" that the Ethereum process can work. He noted that there is no penalty for users who wish to use their Ether at a later date and that nothing will happen in the new Ethereum chain for a long time.
The November 24th deadline set by Ethereum for using Ether is indeed not a hard date, Keys said. The important point is to get the minimum amount of ether. Then the upgrade will start automatically seven days later, he said.
"I am 100% sure that evidence of deployment will be released in 2020," said Keys.
(Updates promised in the third paragraph, prices in the seventh.)
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