Crypto

Despite Tomorrow’s Ethereum Upgrade Postponing the Difficulty Bomb, Coinbase Introduces ‘ETH2’

Ethereum Upgrade ETH2

However, ETH2 is not a new type of cryptocurrency, and the exchange looks to be preparing for Ethereum’s Proof-of-Stake changeover.

Exchange of cryptocurrencies Coinbase has introduced a mirrored version of the Ethereum blockchain’s native coin Ether (ETH) to its crypto price index, just in time for a critical network upgrade on December 10th, 2021.

The symbol, dubbed “ETH2,” shows to be tracking the original Ether market data in real-time. For example, the cost of purchasing ETH2 was the same as that of purchasing ETH. Their market capitalization, volume, circulating supply, and price fluctuations were all the same at the same time.

Despite this, unlike the original, the ETH2 token had no Trading Activity, Popularity Score, or Typical Hold Time, implying that its job is to simply track ETH market data until at least mid-2022. That’s because ETH2 appears to be the native token of Ethereum’s upcoming upgrade, codenamed Ethereum 2.0, which is expected to be fully operational by June 2022. The index listing on Coinbase, on the other hand, appears to be closer to “Arrow Glacier,” a fork that would offer developers more time to prepare for Ethereum 2.0.

Before Ethereum 2.0

The Arrow Glacier upgrade tries to postpone a so-called “difficulty bomb,” a hardcoded incentive in the Ethereum blockchain since its introduction in 2015 that would make mining Ether difficult. If triggered, the BOMB would cause the Ethereum network to slow down for as long as it is proof-of-work.

Tim Beiko, one of the Ethereum upgrade’s main engineers, speculated that Arrow Glacier could be the final upgrade before Ethereum 2.0 goes live next year. Meanwhile, Coinbase appears to have interpreted the Arrow Glacier fork as confirmation that a new coin named ETH2 would be created following the Ethereum 2.0 upgrade.

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In summary, Ethereum 2.0, also known as “Serenity,” would allow for significant architectural modifications, such as a full-scale transfer from the energy-intensive Proof-of-Work (PoW) — which is also used by Bitcoin (BTC) — to Proof-of-Stake (PoS).

To keep Ethereum’s public ledger running in its current state, nodes must validate every transaction. The Ethereum 2.0 update, on the other hand, would introduce “sharding,” which would divide the network into several portions (called shards) and assign nodes to each shard at random.

This would eliminate the need for each node to scan the entire chain, theoretically increasing network speed and lowering costs. Individual shards would then communicate transaction details with a so-called Beacon Chain, which acts as Ethereum 2.0’s backbone.

ETH2 is not a new cryptocurrency. The Beacon Chain, which launched in December 2020, will validate transactions on each shard, assisting the Ethereum 2.0 network in reaching consensus. It would also detect dishonest validators and impose sanctions by taking a piece of their stakeout of circulation.

The ETH (or ETH2) token, which primarily serves as a staking token for validators to participate in network consensus and, in turn, get block rewards, would be at the heart of Ethereum 2.0’s PoS concept.

Since its inception in December 2020, Beacon Chain’s deposit contract has collected over 8.42 million ETH tokens from 55,300 individual depositors (validators).

That noted, ETH2 is not a new coin and will not affect the quantity of ETH in one’s wallet. ETH2 may instead wind up becoming a rebranded version of the original Ether, as Coinbase’s index listing suggests, without the need for holders to switch from one to the other.

The Author

Samuel Adeshina

Samuel is a financial reporter whose interests include blockchain, market, business, insurance, and Crypto to provide relevant information to all interested.