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As Ethereum Completes Another Shadow Fork, Is Proof-of-Stake Imminent?
Cryptocurrency is the future, yet all-too often it feels like a future that will never come. This is occasionally the sentiment that arises when observing Ethereum, which has been planning a transition to a proof-of-stake consensus mechanism for over six years, and which despite passing many important milestones in recent months, is still in the process of implementing this transition.
However, it now looks like Ethereum has reached the end game as far as the long-awaited Merge is concerned, with its developers completing another mainnet shadow fork that will test how PoS will work. This follows the launch of the Kiln testnet in March, again indicating that the move to proof-of-stake really is now only a matter of time. And while Ethereum developer Tim Beiko has admitted that we may have to wait until a “few months after” June for the Merge, its arrival is likely to provide the shot in the arm that both ETH and the wider cryptocurrency market sorely need.
Ethereum Developers Complete Mainnet Shadow Fork
No longer dubbed ‘Ethereum 2.0,’ what the Ethereum community is now looking forward to is Ethereum’s integration with the so-called Beacon Chain. The latter is a ‘consensus layer’ that will handle proof-of-stake consensus for the overall network, once it is merged with the existing mainnet, which will be referred to as the ‘execution layer,’ responsible for operating transactions.
This is the basic outline of the PoS version of Ethereum, and developers took a step closer to making it a reality on Saturday April 23, when they completed a mainnet shadow fork. The second such shadow fork in the past month, it works by updating to a new version of the Kiln testnet, which itself was rolled out in March. Basically, the testnet enables developers to have a trial run through the merge, while the shadow forks also help them test how updates to the merged PoS Ethereum blockchain will work out in practice.
Source: Twitter
Importantly, the Kiln testnet is described by the Ethereum Foundation as “the last merge testnet created before existing public testnets are upgraded.” In other words, it’s the final step before launching a public beta, which itself is the beginning of the actual Merge.
Without getting too technical, the second shadow fork saw the Ethereum development community take some important steps in making the code for the Merge usable IRL. As developer Parithosh Jayanthi tweeted, this was the first shadow fork “where every client combination survived the transition and managed to stay in sync afterwards.”
Put differently, pretty much everything worked as planned, save for the discovery of two “non-critical bugs” that were “patched really quickly.” This is important, because plenty of naysayers have argued that “the merge will never happen,” yet the rollout of the Kiln testnet and the increasingly successful shadow forks have changed the narrative significantly.
Source: Twitter
Still Waiting for PoS, But Not For Too Long
However, while the second Ethereum mainnet shadow fork helped developers make important progress, this doesn’t mean that the Merge and the arrival of PoS Ethereum is imminent. As stated above, a couple of ‘non-critical’ bugs were discovered, implying that testing teams have to resolve these with updates and then shadow fork again. And maybe again, until they produce a shadow fork of the merged Kiln testnet with no issues.
That the Merge is facing another small delay was confirmed by developer Tim Beiko, who was replying to a query on Twitter about miners.
Source: Twitter
This info from Beiko was widely reported in the crypto-focused media, and it came as a downer to many expecting Ethereum to complete the Merge earlier. Many had latched onto June as an expected date of delivery, partly because the Ethereum Foundation had stated ‘Q2 2022’ as its target date, and partly because a ‘difficulty bomb’ had been expected for June. The latter means that the difficulty of mining Ethereum would increase exponentially, disincentivizing miners from mining new blocks, and thereby making it imperative that developers can complete the Merge successfully before it occurs.
However, this difficulty bomb will now happen later, meaning that developers have more time to resolve bugs and other issues. Of course, there’s always a chance that another ‘delay,’ will occur between now and the Merge, given the possibility of uncovering more problems.
Regardless, it’s now clear — unless you’re a conspiracy theorist — that Ethereum is making significant progress towards the Merge. And when it does happen, it will likely be the biggest event in crypto in 2022, providing a catalyst that will re-inspire confidence in the cryptocurrency market and sector. This is something that numerous commentators have been predicting for months.
Source: Twitter
Some Ethereum supporters even suspect that the move to PoS could change the whole dynamic of the cryptocurrency market. That is, whereas bull market cycles appear to have been driven in the past by Bitcoin halvenings (the last one happened in May 2020) and miners selling their stock, Ethereum’s shift to PoS will take the latter source of selling pressure out of the equation, leaving only more positive upwards pressure behind.
Source: Twitter
Looking specifically at Ethereum, the switch to PoS will be positive for the price of ETH for various reasons. Firstly, staking will help instigate a supply squeeze, in that a growing number of ETH holders will lock up the altcoin via staking. Already, over 11 million ETH is staked in the Beacon contract, representing around 10% of circulating supply. Once the Merge is successfully completed (thereby giving potential stakers more confidence), this figure could grow sharply. As a result, demand exceeds supply, and ETH’s price rallies.
Secondly, PoS consumes vastly less energy than PoW, meaning that Ethereum will become more palatable to bigger institutional investors that need to abide by ESG (environmental, social and corporate governance) mandates. With some institutions already looking into ETH (over BTC) as early September 2021, Ethereum’s improved green credentials could really tip the scales in its favor.
Indeed, when it happens, the Merge is likely to be a momentous event. It will prove the naysayers wrong, and more importantly, it will show that Ethereum’s promises for the future really can be trusted.
