One year after transitioning to proof of stake, Ethereum has experienced significant improvements in energy use and network accessibility. However, there are still technical challenges ahead. The Ethereum mainnet merged with the Beacon Chain on September 15, 2022, resulting in a shift from energy-intensive proof of work (PoW) to proof of stake (PoS). This transition led to a 99.9% reduction in energy consumption, according to data from The Cambridge Centre for Alternative Finance. The Merge also made Ethereum economically deflationary, with more Ether being burnt than issued, resulting in a reduction of the total supply of ETH. Despite expectations of a surge in price, Ethereum’s growth has been overshadowed by macroeconomic factors like the banking crisis and inflation, causing Bitcoin to outperform it. The proof-of-stake upgrade introduced stakers to secure the network, with liquid staking providers, such as Lido and Rocket Pool, benefiting significantly. Over $19.5 billion worth of ETH is currently staked through liquid staking protocols. However, concerns have been raised about the control granted to staking providers, particularly Lido Finance. While liquid staking promotes network governance inclusivity, proponents argue that challenges remain. One concern is centralization of the validation process, with Lido controlling 32.26% of all staked Ether on the network. Regulatory pressure against the cryptocurrency industry in the US is another significant concern for Ethereum. Additionally, the current reliance on centralized web providers for Ethereum nodes poses a risk of centralization. Vitalik Buterin suggests that reducing costs and hardware requirements for node operators through the concept of statelessness could help address this centralization issue in the long term. However, solving these challenges may take years to accomplish. In other news, a new Murakami exhibition explores themes of NFT collapse and egos.
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