A year after one of the most talked-about software updates since the Y2K transition more than two decades ago, cryptocurrency’s most important commercial highway is at risk of becoming a victim of its own success.
The rebuild of the Ethereum network, known as Merge, has emerged as a seamless transition to a more energy-efficient system for ordering transactions on the blockchain. One of the incentives offered to participants is the opportunity to earn income from tokens used to keep the network running. The increased demand for the so-called staking feature has increased the chances of the network collapsing.
As part of the staking process, the Ether tokens that form the basis of the network are “locked” in digital wallets to help facilitate transactions and generate revenue. About 20% of the roughly $41.5 billion worth of Ether in circulation is currently staked, according to data tracker Staking Rewards.
According to the document co-written by Tim Beko, who coordinates Ethereum developers, if the current pace continues, this amount will increase to 50% by May and 100% by December 2024. What is driving demand is that staking has become one of the few reliable ways to make profits in cryptocurrency. Most token prices are still less than double the all-time highs reached at the end of 2021. Ether holders can currently earn around 4% by staking.
“We all just like to consume, but not when the security of Ethereum is at stake,” another author of the article, known as Dapplion, said on social platform X, formally known as Twitter.
The worst-case scenario is that Ethereum is unavailable for transactions on the network. This increases the load at least on the part of the network used to order transactions.
That’s why Ethereum developers are working to slow down the flow of bets. On September 14, developers agreed to limit the number of new validators running staking wallets allowed to join the network every six minutes. This change will be marked by the next major Ethereum software update later this year. According to the document, with the so-called exit change, Ethereum will theoretically not reach 100% of all Ethereum in circulation for several years.
“We want to slow down the process a little bit to save time,” Matt Nelson, product manager at Ethereum infrastructure developer Consensys, said in an interview. Source
Source: Port Altele
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