There’s a monumental shift planned for the second largest cryptocurrency by market cap. Ethereum is edging closer to its new consensus algorithm, which promises to fix the platform’s scalability and transaction throughput bottlenecks – but a new industry report claims it might not work.
Currently, Ethereum ETH is much like Bitcoin in that anyone can join the network by simply contributing computing power to ensure transactions are legit (Proof-of-Work).
But its developers have been gearing up to revamp how the network selects and rewards those who keep the blockchain trustworthy and secure.
Ethereum holders will instead be able to use the weight of their balances to vote on passing or refusing transactions (Proof-of-Stake). If validators attempt to game the system by being dishonest, they will lose all of their tokens as punishment.
This is considered more energy efficient than Bitcoin’s Proof-of-Work, and proponents of this consensus style would say it’s more “egalitarian.”
In light of this, boutique digital asset research firm Delphi Digital picked apart Ethereum‘s proposal with an extensive investigation. It has been shared directly with Hard Fork, so let’s dive in to find the major takeaways.There are no more token sales to generate profit
The success of the new Ethereum boils down to correctly incentivizing holders to lock up their cryptocurrency, essentially using its value as clout for validating transactons. This process is called “staking.”
But getting cryptocurrency fans to “store” their digital value in order to keep the network chugging along healthily is just a small part of the picture.
Initial coin offerings (ICOs) are a thing because startups with Ethereum-based tokens need to sustain themselves. Being token creators, these businesses usually keep a substantial percentage to sell to retail investors through cryptocurrency exchanges.