Blockchain news with Ethereum. We talk a lot about the Ethereum blockchain and hear everything about it, when is it just before the summer of 2023.
Blockchain news with Ethereum. We hear a lot of comments about it: too slow, too expensive and so on. But what exactly is the situation?
Staking on Ethereum is doing very well.
It wasn’t a foregone conclusion, but the proof is in the pudding: it works. However, there’s still a lot to be said.
Now, before going any further, let’s briefly recall what blockchain is.
Ethereum blockchain explained in a few words:
Ethereum is an open source blockchain platform that was introduced in 2015. It has gained popularity thanks to its « smart contract » functionality, which enables the automatic execution of predefined digital agreements. Here are some of Ethereum’s key benefits:
Smart contracts:
Ethereum enables the creation and execution of smart contracts, which are autonomous programs capable of verifying, facilitating and enforcing the execution of agreements without the need for intermediaries. This offers benefits such as process automation, elimination of third-party fees and improved transaction efficiency.
Decentralization:
Ethereum is based on a decentralized architecture, meaning that there is no single central authority controlling the network. Transactions are verified and recorded by a network of distributed nodes, making the system more resistant to censorship and malicious attacks.
Interoperability:
Ethereum enables interoperability with other blockchains and systems. Protocols and standards, such as ERC-20 and ERC-721, facilitate the exchange of digital assets between different platforms. This encourages innovation and collaboration between blockchain-based projects.
Community and ecosystem:
Ethereum benefits from a large community of developers, companies and users who contribute to its ecosystem. This dynamic community fosters the development of new applications and innovative solutions on the Ethereum platform.
Programmability:
Ethereum offers great programming flexibility. Developers can create decentralized applications (dApps) using Turing-complete programming languages such as Solidity. This enables the creation of diverse applications and use cases, from decentralized games to electronic voting systems.
Scalability:
Ethereum is currently working on a major upgrade called Ethereum 2.0, which aims to improve the network’s scalability. This upgrade will introduce the proof-of-stake consensus mechanism and enable more transactions per second, which could solve the scalability issues facing Ethereum.
It should be noted that, despite its advantages, Ethereum also has limitations, including scalability issues and variable transaction fees in times of high demand. However, the development team is actively working to improve the platform and mitigate these issues.
Blockchain news with Ethereum:
The Ethereum blockchain never stops evolving – just follow its activity to see for yourself.
Here, for example, is further proof. When the ethereum network allowed the withdrawal of staked Ether (ETH) and related rewards on April 12, 2023, several updates were made to the blockchain. On May 4, 2023, the annual return on Ethereum staking was estimated at 6.6%. The estimated yield varies somewhat depending on how ETH is staked: via solo home staking, staking-as-a-service, liquid staking pools or centralized exchanges.
The number of validators has risen over the past 30 days to a total of almost 562,000. One might assume that as the number of validators increases, the annual percentage yield (APY) would fall, but transaction fees and maximum extractable value (MEV) technology could increase the yield in turn. The aim of MEV is to prioritize transactions and outsource block production to third parties in order to maximize returns. As use cases develop and more ETH is used, the transactional part of the yield could increase.
The importance of validators: the challenge has been met:
The more validators there are, the more secure the network, although there comes a point when additional validators no longer add value in terms of security, but add to the cost of securing the network.
In reality, Ethereum developers are thinking of capping the number of validators to ensure that they don’t overpay for economic security and have plenty of new ETH to stake, as well as for collateral purposes behind stable decentralized currencies. It also seems necessary to restrict the growth of validators since some of the future updates on Ethereum, such as the single slot finality, require all validators to respond within seconds. Having a million validators may make this process technically difficult.
From the end of May to the end of June, the quantity of ETH staked increased by over 4% to reach a total of almost 18 million ETH staked.
Including ETH rewards, the total number of ETH staked is over 19 million. This is only 15% of the total number of ETH in circulation.
And what about the future?
The staking rate is expected to increase further and at least double in the coming year.
What remains to be improved:
For the time being, the network’s capacity to process transactions remains limited to 15-30 transactions per second. Until recently, to address the problem of limited capacity, Ethereum developers were talking about implementing sharding later this year. Sharding is a term whereby the network is divided into smaller « shards » to increase capacity. What seems to have been the priority recently is to collaborate with layer 2 networks and increase Ethereum’s network capacity via Proto-Danksharding.
Proto-Danksharding, a welcome solution:
Proto-Danksharding is a way of solving the scalability problem on the Ethereum blockchain. It uses layer 2 rollups to move transactions off-chain, consolidate them and verify them as a single transaction on Ethereum’s layer 1 blockchain. If a problem occurs during a transaction, that transaction can be reconstructed on Ethereum’s layer 1 network. The need to send the transaction data back to the layer 1 network is costly, as the data is displayed on all Ethereum nodes and is expected to remain on the chain forever.
Proto-Danksharding aims to solve this problem by attaching « blob » data to the network temporarily. Blobs are large portable sets that can hold inexpensive transaction data. These blobs are not accessible to the Ethereum Virtual Machine (EVM) environment and would be automatically deleted after a set period. This would enable Layer 2 rollups to send transaction data back to Layer 1 much more cheaply and pass these savings on to users, resulting in cheaper transactions.
