Hard Fork
What it is and how it affects Ethereum
A hard fork is a key term in the cryptocurrency world. It refers to an upgrade of a blockchain protocol that is incompatible with its previous version. In simple terms, it involves a fundamental change in the blockchain structure, which invalidates the old blocks in the new version. This process creates two separate blockchains: one continues to function as before, while the other implements the new rules.
Users wishing to adapt to the new version must download the updated software and follow the new rules. Those who choose to stay on the previous version will continue to operate on the original circuit.
More than just an upgrade
A hard fork is not a minor upgrade; it represents a significant change that can transform the future of the blockchain. One of the most recent examples is Ethereum’s transition to Ethereum 2.0, a process that began on December 1, 2020 with the goal of moving from a Proof-Of-Work (PoW) to a Proof-Of-Stake (PoS) consensus protocol.
On April 12, 2023, the last step of this transition was completed, a multi-year process that has been implemented in phases. This switch to the PoS protocol means the abandonment of cryptocurrency “miners”, which drastically reduces the energy consumption of the Ethereum blockchain. In addition, this move makes Ethereum more attractive to investors concerned about ESG (environmental, social and governance) criteria.
Another highlight is the improvement in network security, with the increase to 16,384 validators for each transaction.
New Updates and Protocols in Ethereum 2.0
In addition to the transition to PoS, the Ethereum hard fork has introduced important updates and new protocols. These include EIP-4844, also known as the Shapella update, which seeks to reduce per-transaction costs. Other enhancements include:
- EIP-3074: Enables the delegation of signatures to other smart contracts.
- EIP-3541: Restricts the use of certain invalid codes in smart contracts.
- EIP-2537: Supports elliptic curves BLS12-381, improving cryptographic efficiency.
Impact of the Hard Fork on Ethereum Value and Layers 2.
Regarding the value of ETH, it remains to be seen whether this hard fork will positively affect its price or whether the market has already adjusted the value based on expectations. What is clear, however, is that the focus should be on Ethereum Layers 2.
These secondary layers offer a scalability solution, allowing more transactions to be processed per second and reducing gas costs on the network. Transactions are not carried out directly on Layer 1 (Ethereum’s main layer), but on a secondary layer that uses the main blockchain as a security system. This reduces the load on the network, increasing the speed and efficiency of transactions.
Conclusion: A Promising Future for Ethereum
Ethereum has completed its transition to version 2.0, becoming more energy efficient and improving several technical aspects along the way.
Are you wondering if this hard fork can affect your business? Do you want to know the advantages of operating in Layer 2 versus Layer 1? Do you have doubts about how ESG criteria relate to this innovation? The Lighthouse Team can advise you and help you take advantage of the full potential of this technology for your company.
