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(Bloomberg) – Ethereum, the most widely used blockchain in the world, has little time to convince users to commit enough digital currency to allow for a network upgrade that would allow it to process a similar number of transactions as Mastercard Inc. and Visa Inc .
Since Ethereum launched in 2015, it has relied on a slow, energy-intensive method to ensure that the computers on its network agree on the current state of its digital ledger. Ethereum developers have been working for years to move to a system that instead uses a shared amount of the digital currency Ether to secure the network and allow it to reach consensus much faster.
Known as proof of stake, at least 524,288 Ether must be committed to a deposit agreement by November 24 for Ethereum to begin the upgrade. If this happens, the changes will start automatically starting December 1st. As of November 22, about 48% of that total, or 253,600 Ether, had been deposited. The upgrade also has the potential to reduce the total supply of Ether, which could put upward pressure on its price.
“Obviously staking for the initial December 1 phase-in is in trouble, so I expect further delays, but things are already over a year behind schedule,” said Aaron Brown, a cryptocurrency investor who also writes for Bloomberg. Opinion. “This is a symptom of a more general problem: the success of cryptocurrencies finds it incredibly difficult to make even routine technical corrections, far fewer major transitions.”
Learn more: About the big plans for Ether, the “other” cryptocurrency (podcast)
Ethereum has garnered a wide following for its promise to create an alternative financial sector and the internet where middlemen are eliminated. This is because transactions are processed by computer programs known as intelligent contracts rather than by companies. It also has the potential to streamline back-office transactions for industries such as banking, cross-border payments, and the supply chain, which could save businesses millions. The slow nature of the net, however, has held it back and is a driving force for the move to the test of the stakes.
“Ethereum needs to scale to become a global substrate of the clearing and settlement layer,” said Andrew Keys, executive member of Darma Capital and an early employee of the Ethereum ConsenSys application incubator. The current version of Ethereum has shown that gold, currencies, music and other real-world items could be successfully digitized, he said. “Now, it must be able to serve the global volume.”
The plan to focus on Ether comes as cryptocurrency prices are rising again. According to data compiled by Bloomberg, bitcoin has more than doubled this year to nearly $ 19,000, a high last reached in late 2017, when it approached $ 20,000. Ether nearly quadrupled to around $ 500. Bitcoin, like the current version of Ethereum, uses proof of work to reach network consensus.
The upgrade of Ethereum to proof of stake will take place in at least three phases. The first, which will begin once the 524,288 Ether is deposited, will allow people who bet Ether to process transactions and earn rewards. The next will divide the new Ethereum network into 64 separate blockchains so that transactions can be processed more quickly.
Kyle Samani, co-founder of Multicoin Capital, said he was “skeptical” that the Ethereum process could work. He noted that there are no penalties for users who want to stake their Ether later and that nothing will happen on the new Ethereum chain for a long time.
The November 24 deadline set by Ethereum for staking on Ether is not a difficult date, Keys said. The important point is to reach the minimum amount of Ether, so the update startup process will happen automatically seven days later, he said.
“I am 100% certain that the stakes test will be launched in 2020,” said Keys.
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