Search Inside Bitcoins

Experts say Ethereum 2.0 Poses Risks Despite Promised Benefits

Early Ethereum and tZero Advisor Steven Nerayoff Faces Extortion Charges
Early Ethereum and tZero Advisor Steven Nerayoff Faces Extortion Charges

Join Our Telegram channel to stay up to date on breaking news coverage

Ethereum is planning to carry out its Ethereum 2.0 upgrade, but experts have advised that it poses some risk too. To make the Ethereum network more secure and scalable, there will be an upgrade to a proof-of-stake model, which will offer new benefits to the users.

The Ethereum model has made its ETH more attractive to investors as it allows the investors to receive passive income for the validation of transactions. Also, users have two options. First, the user can stake without running nodes or make deposits. Secondly,  the user can choose to deposit 32 ETH and run a validator node software.

This process has given Etherum a strong user-base and loyal community who are the supporters of staking. As the new upgrade is about taking off, the community is worried that, although there are accruing benefits, it also poses a risk. It’s still not clear how the staking model will affect users who decide to trade, hold, or stake with the new network. There is also uncertainty regarding the fate of those who want to continue mining with the old network.

Upgrade to Ethereum 2.0 will have a positive impact

If there is one thing most experts have agreed on, it’s the fact that upgrading to Ethereum 2.0 will surely have a positive impact. They believe the recent upgrade plan will have a positive impact on trading volumes and the price of ETH. And for those who opt for the buy-and-hold strategy, staking can be a better investment prospect for them rather than trading ETH futures.

Ethereum Continues to Collapse - Market Share Reaches a 30-Month Low

The upgrade will reduce cost

Binance CEO, Changpeng Zhao, said staking will induce the stabilization of crypto prices, as it will help users set limit, set orders, and make market purchases. Apart from this benefit, there may be another expected benefit people are hoping from the Ethereum 2.0 upgrade. The upgrade, according to experts, will improve the speed of network transactions and minimize cost as well.

Problem of adaptability

An investment expert at ConsenSys Ventures, Praneeth Srikanti, was speaking about the positive impacts the forthcoming Ethereum 2.0 will have on the market.

“Proof-of-stake comes with several improvements, including energy efficiency, lower barriers to entry, and stronger crypto-economic incentives,” he said. But with these numbers of benefits, the upgrade still comes with its number of challenges.

One major risk is the fact that stakers will have high requirements. Also, to be eligible for transaction validations, there will be a need to freeze funds. Another problem is the final transition from Ethereum 1.0 to 2.0. When it’s completed, users would be allowed to stake ETH and receive rewards on the new ETH 2.0 network. The problem here is adaptability.

According to Praneeth, the complexity of the new model will lead to a lack of understanding, which is the major issue adopters of the upgraded system will have.

Join Our Telegram channel to stay up to date on breaking news coverage

Read next