Ethereum, the second-largest blockchain, has experienced a noteworthy year but will confront substantial difficulties in 2023.
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The second act of Ethereum, often known as Ethereum 2.0, began this year.
In 2015, the year Ether started, a process to switch the No. 2 blockchain, with a market valuation of $162 billion, from a Proof-of-Work consensus mechanism to a more environmentally friendly, and eventually more scalable, Proof-of Stake, was already underway.
The Merge took place on September 15, long overdue, and is still a work in progress; sharding will happen in 2019.
Even yet, the switchover was a major success that went “flawlessly,” according to those who witnessed it in real-time. This was no small achievement for a project whose supporters and developers likened the transition to changing the engine in a moving car.
In other words, the biggest smart contract blockchain in the world has had a very busy year.
This accomplishment also occurred in the year that the U.S., EU, as well as many other nations, started designing and passing complete crypto regulatory regimes, the first crypto winter since the mainstreaming of digital assets.
A $48 billion stablecoin went up in flames, a substantial portion of cryptocurrency lenders filed for bankruptcy, and the inventor of the second-largest cryptocurrency exchange in the world was put behind bars as a result of a triad of scandals that caused millions of investors to lose their tokens.
In light of the foregoing, the top 10 Ethereum-related news stories of 2022 are listed below.
1. Ethereum moving from a Proof-of-Work to a Proof-of-Stake blockchain
The majority of the year was spent preparing for The Merge, which occurred on September 15. At that point, the previous Ether blockchain, now referred to as the “execution layer,” was replaced with the current blockchain, now known as the “consensus layer.”
There are many more specifics, but the essence is that Ether is now a much more environmentally friendly Proof-of-Stake blockchain and has abandoned Bitcoin-style Proof-of-Work mining.
With Google running a countdown to The Merge and director Ridley Scott agreeing to adapt Camila Russo’s bestseller Ether novel The Infinite Machine for cinema, it captivated the public’s interest to degree projects this technology has.
2. Ethereum Goes Green
Before The Merge, Austria’s annual electricity consumption was equal to that of Ethereum’s Proof-of-Work blockchain. After that, according to Digiconimist, a company that monitors the cost of electricity for Bitcoin and Ether, both its electricity use and carbon footprint have decreased by more than 99.9%.
The shift in the environment wasn’t merely a PR triumph. Crypto has been significantly impacted by the burgeoning environmental, social, and governance (ESG) investor movement.
And the so-called “Ethereum killer” blockchains, including Algorand, Avalanche, BNB, Cardano, Fantom, Polkadot, Solana, and others, are PoS and fought the original smart contract platform tenaciously with the environmental argument.
3. The Fall, Rise, and Fall of ETH’s Price
After plunging 33% from an all-time high of $4,891.70 reached in November 2021, Ether had already joined Bitcoin and the rest of the cryptocurrency market in the initial collapse of the bull market by the time January 1 rolled around.
When the Terra/LUNA stablecoin ecosystem failed, ETH fell as low as $2,172 on Jan. 24. It wouldn’t recover to that level until the second major drop of the year. It later rose to $3,500 as interest in The Merge increased.
On May 5, stablecoin started depegging, and its partner token LUNA lost $48 billion, thereby losing all of its value and wrecking the whole cryptocurrency market.
Ether surged to temporarily cross $2,000 in mid-August, up more than 100% over that time, while Bitcoin only increased by roughly 30%. The summer was better.
But it couldn’t last, and not even the anticipation of the Sept. 15 merger could get it to that level once more.
The price of ETH has not fared well in what was expected to be the year of Ether.
4. The Significance of Sharding
Buterin stated in August that the high transaction costs associated with Ethereum had societal costs in addition to negative business effects.
With the inclusion of sharding, which divides the blockchain into tiny sections (called “shards”) that each process a small portion of the data, Ethereum’s transaction processing speed will increase to as high as 100,000 TPS. Currently, it can handle roughly 12 to 15 transactions per second.
Buterin claimed in his presentation that rollups, a different technology, could reduce transaction fees from $0.002 to $0.05.
5. The Ethereum Staking Protocol
Stakers committed 15.6 million ETH, which is currently worth $20 billion, to a deposit contract over the course of the last two years, which was essential to the smooth transition of Ethereum from Proof-of-Work to Proof-of-Stake. However, because the lockdown could not or would not be extended forever, several players were discouraged from participating.
The fact that the staking pools effectively centralize PoS Ethereum raises some serious issues, though.
6. Is ETH a commodity or security?
The possibility that Ether has become security is one of the Ether 2.0 project’s biggest unforeseen effects.
A cryptocurrency’s status as a security entails several legal and regulatory burdens.
The long-awaited legal framework, which will almost definitely be put into law next year, has been the focus of one of the crypto industry’s largest efforts this year to persuade Congress that it is to the industry’s liking.
7. Losing NFTs
The dominance of Ether in the NFT market did not fare well this year. It is still by far the largest blockchain for anything from PFPs to artwork, therefore it isn’t broken.
Because of this, an increasing number of projects have started using or have moved to use Ethereum killers or their blockchains. Solana was a pioneer in this area, but the blockchain has suffered as a result of FTX’s collapse.
8. PoW Ether: Will It Survive?
When Ethereum underwent a significant hard fork for the first time, a group of users who didn’t like the new path launched the Ethereum Classic network (which was to cancel out The DAO hack).
The majority of the cryptocurrency community does not support PoW Ethereum projects. The creators of the two most popular stablecoins, Circle (USDC) and Tether (USDT), announced over the summer that they will exclusively support PoS Ethereum.
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