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After receiving an update in August commonly known as the “London Hard Fork”, Ethereum is expected to undergo major changes in how it works. The London Hard Fork update joins a list of major updates done previously on the network.
How Ethereum operates
The update focuses on the Ethereum operations and mining processes. Traditionally, the Creation of Ethereum is done through mining. Mining involves running of set computer algorithms until a certain threshold is met. On achieving this, a reward is given in form of Ethereum coins.
This is not unique to Ethereum as other cryptocurrencies such as bitcoin have the same creation process.
Challenges of Mining
In recent days, there has been growing opposition to the mining of cryptocurrencies due to the huge amount of energy needed to complete the process. In the process of getting the required amounts of energy, some miners are resulting to use of unclean energy sources increasing carbon footprint.
We have already seen some major brands boycotting the use of these cryptocurrencies due to this issue of using unclean energy.
To address these concerns and realities, the London hard fork seeks to change the process of Ethereum creation by eliminating mining in the long term. This will happen through changing from the Proof of Work (POW) concept currently in use to the Proof of Stake (POS).
This will prompt stakers to participate in the creation of new coins as opposed to the traditional miners.
The shift to the POS concept will help minimize the need for a huge amount of energy. This will assist in giving Ethereum more credibility in the face of a world that is very sensitive to climate change.
How to achieve this
To eliminate mining, the update targets making it harder to mine. This is achieved by introducing fake bots that pose as miners. An increase in miners prompts the network to increase the mining difficulty making it harder to generate coins.
This process will continue until it becomes impossible to mine any new Ethereum again. At this point, miners will have no role in creating new Ethereum
There has been some criticism after the update because some of the players such as miners will suffer.
Miners have over the years done huge investments both in the hardware and software infrastructure that enables them to mine coins. Eliminating mining will push them out of business in the long term.
With this update, this is inevitable and some are already considering exiting the business in its entirety. Others will have to refocus their assets in mining other coins.
However, there is a bigger number of players who believe this is a necessary pain to make the coin more resilient, valuable, and acceptable.
The London Hark Fork update will usher the coin into a new era of cryptocurrencies. An era whereby environmental sustainability is becoming a priority.
The introduction of the mining difficulties will help reduce supply helping in boosting Ethereum’s price in the long term.
Based on the above, it is my belief the update was necessary. Although it will cause some disruptions, its long-term benefits are clear.