An in-depth look at the impact of the Altair upgrade on the Ethereum blockchain and assets

Image source: Internet

Image source: Internet

By: Lucas Outumuro, Senior Analyst, IntoTheBlock

This post will take an in-depth look at the Altair update completed on Wednesday and how it laid the groundwork for the merger, possibly the biggest Ethereum upgrade to date. The article will discuss the impact of these upgrades on the Ethereum blockchain and the asset Ethereum. Collectively, these improvements are part of a larger set of systemic changes with the goal of making Ethereum more scalable, environmentally friendly, and also more secure, while in the process making Ethereum and the beneficiary.

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Altair launch

Altair's upgrade just happened on October 27, 2021 around 11AM (UTC). Regular users of ethereum may not notice a difference in this upgrade, as it does not affect the application-hosted blockchain, but the Beacon chain. This upgrade enhances the decentralization and security properties of the Beacon Chain.

Recalling what was described in the first part of this series, the Beacon chain is Ethereum’s proof-of-stake blockchain, and since December 2021 it has been running in parallel to the proof-of-work blockchain. Currently, the Beacon chain only handles staking rewards, with no protocol running on top of it to keep the network working as intended. The Beacon Chain launch was largely successful, with 100% uptime and over 8 million Ethereum staked.

This represents more than $33 billion worth of ETH being pledged, and these ETH accounts for 6.8% of the total circulating supply. Ethereum reached this milestone with over 50,000 validators depositing directly into the staking contract.

Altair’s upgrade is the first for the Beacon chain, and possibly the only one before merging with the proof-of-work (PoW) chain. In it, Altair implemented two major improvements: support for "light clients" and updated measures to deal with inactive nodes and bad actors.

Under the previous system framework, only full nodes could run on the Beacon chain, which made it impossible for people with low-end GPUs or devices with low memory capacity to participate. After the Altair upgrade, these "light clients" can run on low-end machines, making it easier for anyone to verify transactions that occur on the Beacon chain. "Light clients" use full nodes in a trust-minimized manner, ensuring that the blockchain can be verified in a decentralized manner.

Finally, Altair is also a way to ensure that the Beacon chain can be upgraded smoothly. With these improvements, and a few minor bug fixes, Altair is preparing for Ethereum's biggest and most anticipated update yet.

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Merge and Sublime

Since 2014, Vitalik has proposed Ethereum's transition to proof-of-stake. This will not only reduce the resource consumption of the network to almost negligible, but also effectively improve the security and scalability of Ethereum. The so-called merger will achieve this vision by migrating applications running on the current proof-of-work blockchain to an executable version of the Beacon chain.

Merge has been successfully tested for the first time at the Amphora Workshop and will continue to be observed and experimented with over the next few months. According to a recent Ethereum core developer meeting, the deployment merge will be completed by March 2022, and more safely, the merge will happen in the second quarter of the same year.

The implementation of the merger will not only affect applications running on Ethereum, but also benefit Ethereum holders. The merger is achieved by simultaneously reducing the issuance of Ethereum and increasing rewards for staking users. Currently, Ethereum's supply is growing by about 2% per year, with a circulating supply of about 118 million ETH.

Post-merger, issuance of ETH is expected to drop by 90%, with supply peaking at around 120 million and slowly declining thereafter. This in turn ties in with EIP-1559, which introduced a basefee to effectively remove excess ETH from circulation as usage of the Ethereum blockchain grows. ETH then goes into deflation and is expected to create an upward price momentum as its supply dwindles as demand increases.

Additionally, since Ethereum will no longer rely on miners, the remaining unburned transaction fees will go to validators participating in Ethereum staking. Expectedly, this will drive higher staking APY returns. These rewards vary based on the amount of ETH staked, the fees being processed, and the percentage of those fees being burned. After the merger, staking rewards could double from the current 5 percent to 10 to 12 percent, according to forecasts.

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Summarize

Summarize

As many of you may have noticed, one thing that was not mentioned in this article is the scalability part. Because this doesn't fit well with the discussed Ethereum 2.0 upgrade theme, it's currently being addressed by second-layer solutions. Layer 2 scaling platforms such as Arbitrum and Starkware have reached over $4 billion in total value locked while reducing Ethereum transaction fees by 90% and increasing throughput. Sharding is the final piece of the Ethereum 2.0 puzzle, improving scalability by a factor of 100 by implementing multiple interconnected chains. Currently, sharding is expected to launch in late 2022 or early 2023.

This article is from Bitpush.News, reproduced with authorization.