The Ethereum network is set to implement an upgrade called Arrow Glacier on Dec. 9, 2021. A key impact of this upgrade is that it will delay the onset of a so-called "difficulty bomb"—which would hamper or halt further mining of its Ether (ETH) cryptocurrency—to June 2022.1
"After the transition, the 'bomb' will no longer exist on the network," according to Tim Beiko, the coordinator for Ethereum's protocol developers. More specifically, Ethereum's developers are working toward the creation of Ethereum 2.0, or ETH2, which will shift its underlying model from "proof of work" to "proof of stake."1
KEY TAKEAWAYS
- Ethereum is implementing an upgrade called Arrow Glacier.
- This will delay to June 2022 the onset of a "difficulty bomb" that could halt mining of the Ether (ETH) token.
- Ethereum is shifting from a proof of work to a proof of stake model.
- Ethereum 2.0, or ETH2, is not a new cryptocurrency, but that new model.
- This will cut energy consumption by more than 99%.
Proof of Work
Under the current proof of work model utilized by Ethereum, miners must solve complex mathematical problems or puzzles to validate transactions. A key critique of this model centers on its negative environmental impact, since it results in heavy use of computer power and thus of electricity. The "difficulty bomb" was an anticipated exponential increase in the degree of difficulty in solving these problems.21
Proof of Stake
By contrast, under the proof of stake model that Ethereum plans to implement in 2022, the blockchain will verify transactions based on holders' stake in the Ether token. It will require vastly less computing power than the current proof of work model since it does not reach consensus by having miners race to complete the same puzzle.
The upshot is that Ethereum 2.0, or ETH2, is planned to be more scalable, secure, and sustainable, reducing energy consumption by as much as 99.95%. Meanwhile, Ethereum mining will not generate revenue any more.21
'Sharding' and 'Beacon Chain'
Cointelegraph, which emphasizes that ETH2 is not a new cryptocurrency, describes the details of the Ethereum upgrade as follows:3
"In the current version, nodes must validate every transaction to maintain Ethereum's public ledger. But the Ethereum 2.0 upgrade would launch 'sharding,' which would divide the network into various segments (called shards) and randomly assign nodes to each shard."
"That would remove the need for each node to scan the entire chain, theoretically improving the speed and costs required to maintain the network. Meanwhile, individual shards would share the transaction details with a so-called Beacon Chain, which serves as the backbone of Ethereum 2.0."
"Beacon Chain, which went live in December 2020, would validate the transactions on each shard, thus assisting the entire Ethereum 2.0 network in reaching consensus. It would also detect dishonest validators and initiate penalties by removing a portion of the validator's stake from circulation."
"Beacon Chain's deposit contract has received over 8.42 million ETH tokens from 55,300 unique depositors (validators) since its launch in December 2020."
"ETH2 is not a new coin and would not change the ETH amount one holds ... ETH2 may end up becoming a rebranded version of the original Ether, without needing holders to swap one version for another."
Potential Issues
Not everyone appears to be happy with the shift to the proof of stake model and ETH2. This move will lower miners' revenues by somewhere between 20% and 35%, according to some estimates. Also, some observers worry that the changes to Ethereum's incentive model could encourage disgruntled miners to leave the network, attempt to sabotage it, or start a competing chain
