Over the past two weeks, Ethereum’s popular ETH coin has nearly halved as confidence grows about switching, or “merging,” to a leaner, more efficient blockchain technology called Proof of Stake. rice field.
But that benefit pales in comparison to the sudden surge of interest in another long-forgotten option from the beginning of Ethereum’s history.
A type of illegitimate child born in 2016, ETC tripled in value over the same period, nearly surpassing its last high in March, according to CoinGecko data.
Its price spike really started last week after Ethereum founder Vitalik Buterin advised users and developers to go back to the original creation if they were unsatisfied with the upcoming Merge.
“It’s a very welcoming community,” Buterin said at the Paris conference. “If you like proof of work, you should go with Ethereum Classic.
ETC arose from the so-called DAO hack of the Ethereum network, where $60 million was successfully stolen from a decentralized autonomous organization just one year after Buterin’s creation was first made public in July 2015.
A vote was taken by DAO users responsible for governance decisions, with a majority in favor of a “hard fork” of the chain to reclaim stolen money to investors.
The decision was so controversial that another part of the community refused to cooperate, instead continuing with the original chain known as Ethereum Classic and its native currency, ETC.
Buterin’s comments are helping to rekindle interest in ETC cryptocurrencies among miners who have struggled in the recent ETH crash, most of whom face virtually losing their income entirely. .
The reason is that when Ethereum, the second most popular blockchain after Bitcoin, switches to a faster and more efficient technology as part of Merge, which is tentatively scheduled for September 19, mining will continue to grow. This is because the service is no longer needed.
Replacing them are stakers who take on the task of maintaining the security of untrusted payment networks.
Faced with an imminent loss of business, mining pool AntPool pledged on Tuesday to invest $10 million to support further development of the now independently operated Ethereum Classic.
Mining vs. Staking
To understand the difference between miners and stakers, it is important to first understand the underlying technology.
Financial transactions typically require a trusted counterparty, such as a bank, to allow both sides of the exchange to achieve the objectives of the transaction before the transaction can be cleared and credited or debited from an account.
However, cryptocurrencies change ownership completely without permission. Complete strangers can use anonymous wallets to buy and sell coins without fear of being shortchanged.
This is because assets like Bitcoin operate using a shared ledger of transactions distributed to everyone interested in maintaining the network. Business is recorded in the form of blocks on the chain, and miners are paid newly created bitcoins as an incentive to validate each of these immutable entries.
This majority consensus mechanism is known as Proof of Work (PoW) and requires an enormous amount of computing power to keep each miner’s copy of the ledger up to date.
Bitcoin’s network prioritized security and decentralization above all else, so it needed enough power to power a small country, and could only process transactions at a snail’s pace by today’s standards.
Therefore, new types of blockchain technology such as Solana have emerged. It takes the exact opposite approach, using what’s known as Proof of Stake (PoS) to improve energy efficiency and scalability, and achieve speeds similar to credit card giant Visa.
Instead of verifying transactions by someone willing to set aside computing power as a mining rig, people wager a certain amount of their holdings, much like a security deposit.
The downside of this solution is that it puts more influence in the hands of a small, select number of people who stand to benefit from being the only ones who can earn blockchain rewards by maintaining the network. It is the concentration of power.
However, there are penalties to keep the system from being abused. In the event of a deliberately staged or negligently authorized attack, staked crypto may be partially or wholly forfeited.
Ethereum is currently in the process of switching from PoW to so-called beacon chains that are currently running in parallel using PoS. Validators who want to win cryptocurrencies must first agree to lock 32 ETH (approximately $55,000 in present value).
Miners who are unwilling or unable to do so can switch to Ethereum Classic.
“They will definitely welcome Proof of Work fans,” Buterin said.
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