Ethereum Blockchain Split creates problems

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CRYPTO ENGINES AND PRICES

Bitcoin (BTC) is outperforming and threatening a decisive breakout at USD 16,000. Besides BTC, Ethereum (ETH) is the only other positive trading top 10.

Crypto Story of the Day

According to a post-mortem published by Péter Szilágyi, team leader at the Ethereum Foundation, the recent division of the chain focuses on the new code introduced in July to fix a bug on Go Ethereum, one of several software options required to run a node on the network. . Yesterday’s chain split was caused by node operators not running the latest version of Go Ethereum, which included the fix.

According to Szilágyi, “A transaction succeeded in triggering the consensus issue by separating the old geth releases from the rest of the network.” This failure of consensus caused major disruptions across the industry: Binance briefly suspended withdrawals, and its CEO Changpeng Zhao wrote that despite the headquarters operating their own Ethereum node and not relying on third parties, they could not be sure of which version of the blockchain their node was was pondering.

The split also caused the closure of Infura’s service, which provides interfacing with the Ethereum blockchain. Companies, such as Coinbase Wallet, Metamask, UniSwap, and Compound, across the industry are using Infura to bypass the need to maintain the entire Ethereum blockchain. The ETH continued to grow for hours after the first reports on the division. The asset has posted gains of around 15% since the Ethereum 2.0 deposit agreement went live last Thursday, which is considered a key technical milestone ahead of the network’s proof-of-stake launch.

We have often highlighted emerging risks as Ethereum approaches its supposed transition to proof-of-stake. Not only do we think there is a high likelihood of dissent in the community on the go, increasing the likelihood of a hard fork, but Ethereum developers have a mixed history of success during the update. Last night’s unplanned split highlights greater risks for the much more complicated transition and the likelihood of problems. Despite this, ETH actually outperformed BTC and others for the better part of yesterday’s session.

There are many precedents in the space with the market responding, apparently inappropriately to problems on the chain. For example, ETH Classic’s 51% attack wave this summer was often ignored by that market. Despite the initial positive market assessment, we continue to view ETH with caution.

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