The Ethereum 2.0 update is right around the corner despite a few setbacks. This update wants to solve some existing problems in the network. The most important thing to resolve is the high transaction cost that is keeping newcomers away. What will happen to Ethereum Price after ETH2.0? Let’s find out.
What is Ethereum?
Ethereum is a blockchain network founded in 2015. The network is notable for being the first blockchain to offer smart contract functionality. As a result, Ethereum can be the basis of decentralized applications. Ethereum’s network token is called Ether, although some people still mistake the token name with the blockchain name.
Ethereum quickly became the second most important blockchain behind Bitcoin. The majority of decentralized applications run on the Ethereum blockchain. Ethereum is a leader, especially in the areas of DeFi and NFTs. The price of the Ether token has grown massively in the past and is currently around 3,000 US dollars (as of April 21, 2022).
What is the Ethereum 2.0 update?
Ethereum 2.0 is an update of the Ethereum blockchain. With this update, Ethereum wants to revise the blockchain code and thereby make it more efficient and secure. Ethereum is the most popular smart contract platform due to its status as the first network to offer smart contracts. However, Ethereum is struggling with problems related to gas fees and, in general, the speed and cost of transactions.
What problems does Ethereum 2.0 want to solve?
Ethereum 2.0 wants to solve the following problems:
- Gas Fee Reduction
- Increase in transaction speeds
- Increase in scalability
- Increased security in the network
What does the Ethereum 2.0 update contain and can it increase the Ether price?
The most important change in Ethereum 2.0 is the switch of the consensus mechanism from proof-of-work to proof-of-stake . This is intended to make the blockchain more efficient and increase transaction speeds. Furthermore, the high gas fees, for which Ethereum has been notorious in recent years, are finally to be reduced.
Furthermore, the beacon chain and some shard chains are added. This means that the transaction load in the Ethereum network can be better distributed and controlled. Overall, the number of possible transactions increases with increasing speed.
The concept of sharding ensures that transactions are distributed across multiple chains. The beacon chain provides the basis for the multiple shard chains. With this adjustment, Ethereum wants to approach the scalability of modern blockchains such as Solana and Avalanche.
The Ethereum 2.0 update is a big event and investors are hoping for an increase in the Ether price. Several EIPs (Ethereum Improvement Proposals) have already caused the price to rise sharply in 2021. The most important was EIP-1559, which provides the basis for the conversion of the consensus mechanism. The price shot up in August due to this development step as part of Ethereum 2.0.
What will happen to Ethereum Price after ETH2.0?
The delay in the launch of Ethereum 2.0 has not boded well for the Ethereum price rise in recent weeks. Nevertheless, this course was more based on the Bitcoin course and thus on the overall market. Can Ethereum 2.0 give the Ether course a boost and may we see a rise towards $5,000?
A successful start could ensure that the Ether course increases massively due to the tailwind of Ethereum 2.0. However, the market must play along with this. If we experience a bull market, Ethereum 2.0 could massively drive the Ether price up in the third quarter and $5,000 would be a realistic price target.