Sun, July 21, 2024

Ethereum updates its algorithm to reduce transaction fees

Ethereum updates its algorithm to reduce transaction fees - Dencun

Vitalik Buterin, Ethereum’s co-founder, issued a long paper regarding the scalability limits of blockchains. He also criticized Tesla CEO Elon Musk’s claims which had a massive impact on cryptocurrency movements.

Buterin emphasized the need for decentralized management to eliminate the risk of a single point of failure in the network. He also widely distributed networks enjoy protection from coordinated attacks. He added that decentralization could not be achieved without permission for ordinary users to run nodes freely.

Buterin predicts that Ethereum can securely process one million transactions per second with a complete blockchain.

Decentralization is what makes blockchain valuable. However, running a decentralized blockchain requires huge electricity, causing high transaction fees.

While Bitcoin is considered “digital gold,” Ethereum is a blockchain-based platform built for developers to operate applications.

Buterin was inspired by the “enormous” progress made in technology and applications in recent years.

For example, in recent months, Ethereum activity has surged because it supports the sale of many non-fungible tokens or NFTs.

High transaction fees are a big concern for Ethereum traders

However, Billionaire Mark Cuban complained to The Defiant that Ethereum is limited by “ridiculous” transaction fees.

Buterin acknowledged that transaction fees are “high now.” Despite the high demand, the Ethereum blockchain can only process 20 to 50 transactions per second.

But Ethereum inventor said that due to the ongoing large-scale technological transformation, he is confident that the cost will drop. It will already allow it to scale up rapidly.

Ethereum is moving from the original algorithmic proof of work in blockchain technology to an updated concept. It is called proof of Stake.

Upgrading means incentivizing participants to get rewards paid by Ethereum to keep them online and keep the network open. It will eliminate the energy-consuming race that comes with proof of work.

At the same time, the switch to Proof of Stake will reduce Ethereum’s energy consumption by 1,000 to 10,000 times.

On the other hand, Bitcoin operates with a proof-of-work system. Buterin believes that this crucial difference legitimizes the environmental concerns surrounding Bitcoin.

Buterin added that this is not only the power consumption of Bitcoin miners but also the hardware required for mining.

This is why Buterin stated that as Bitcoin develops and adapts to technological advancements, there will be more calls within the Bitcoin community to either switch to proof-of-stake or switch to hybrid power.


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