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Ethereum, the second-largest cryptocurrency by market value, just held a final dress rehearsal ahead of a years-awaited upgrade that has been touted as one of the biggest events in crypto history. .
Since its inception nearly a decade ago, Ethereum has been mined through a so-called proof-of-work model. It involves complex mathematical equations that a huge number of machines strive to solve, and that requires abundant energy. Bitcoin mining follows a similar process.
Ethereum has been working to move to a new model of securing the network called proof-of-stake. Rather than relying on power-intensive mining, the new method forces users to leverage their existing ether cache as a way to verify transactions and mint tokens. It uses a lot less power and should result in faster transactions.
The final test took place on Wednesday around 9:45 p.m. ET.
Ansgar Dietrichs, researcher at the Ethereum Foundation, said in a tweet that the most relevant metric for success when it comes to an essay like this is looking at completion time. He called it “another successful test”.
A Galaxy Digital research associate pointed out that the turnout after the test merge dropped and there seemed to be a problem with one of the clients, but overall it worked.
“A successful merge = the chain completes,” Christine Kim wrote in a tweetadding that we’ll likely see similar types of issues with the upgrade on the mainnet, “but the thing is, the merge worked.”
The time of the The upgrade will be discussed at a meeting of Ethereum core developers on Thursday. Previous guidance indicated that the merger should come into force in mid-September.
Ethereum’s transition has been pushed back several times over the past few years. Core developers tell CNBC that the merge has been slow to progress, to allow enough time for research, development and implementation.
The price of Ether, the native token of the Ethereum blockchain, has seen a surge in the past month, rising nearly 80%, including a 10% gain in the past 24 hours to around $1,875. However, it is still down by about half this year.
Here is what happened
One of Ethereum’s testnets, or testnets, called Goerli (named after a train station in Berlin), simulated a process identical to what the mainnet, or mainnet, will run in September.
Testnets allow developers to try new things and make necessary changes before updates are rolled out to the main blockchain. Wednesday night’s exercise showed that the proof-of-stake validation process significantly reduces the energy needed to verify a block of transactions, and also proved that the merge process works.
“Goerli has that badge of an ascending testnet”, said Josef Je, a developer who worked with the Ethereum Foundation and now runs a permissionless peer-to-peer lending platform called PWN.
I added that this is the most used testnet at this point – and proof of stake on Goerli will be almost identical to how things will work on the mainnet.
Spot the bugs
Tim Beiko, Ethereum’s protocol developer coordinator, told CNBC that they usually know “within minutes” whether a test passed. But they will continue to research many potential configuration issues in the hours and days ahead so they can resolve them quickly.
“We want to see the network finalize and have a high turnout among validators and also make sure we don’t run into any unexpected bugs or issues,” Beiko said.
The easiest metric to track is engagement rate, which is how many validators are online and doing their homework, Beiko said. If the numbers drop, developers will need to figure out why.
Another key issue concerns transactions. Ethereum processes transactions in groups called blocks. Beiko said a clear indicator that the test went well will be if the blocks contain actual transactions and are not empty.
The last major check is whether the network is being finalized, which means more than two-thirds of validators are online and agree on the same view of the chain’s history. Beiko says it takes 15 minutes under normal network conditions.
“If those three things look good, there’s a long list of secondary things to check, but at this point things are fine,” Beiko said.
As of December 2020, the Ethereum community has been testing the proof-of-stake workflow on a chain called beacon, which works alongside the existing proof-of-work chain. Beacon fixed some key issues.
Beiko said the original proposal required validators to have 1,500 ether, a stake worth around $2.7 million, in order to use the system. The new proof-of-stake proposal lowers the bar, requiring interested users to only have 32 ethers, or roughly $57,600.
“It’s still not a trivial sum, but it’s a much more accessible system,” Beiko said.
There were other key developments ahead of Wednesday’s test. In June, Ethereum’s oldest testnet, known as Ropsten, successfully merged its proof-of-work execution layer with the proof-of-stake beacon chain. This was the first major simulation of the process that the mainnet will undergo next month, everything should go as planned.
Beiko said testing the merge allowed developers to ensure that the software running the Ethereum protocol was stable and “everything built on top of the network was transition-ready.”