Ethereum 2.0 Economic Review Strongly Suggests Network Is Underpaying For Security

  • Tanner Hoban and Tom Borgers have released an article named ‘Ethereum 2.0 Economic Review.’
  • Proof of stake consensus mechanism has a higher complexity than the previous Proof of Work mechanism.

Recently, Tanner Hoban and Tom Borgers have released an article named ‘Ethereum 2.0 Economic Review’. The article is a detailed analysis of the newly implemented Proof of Stake (PoS) consensus mechanism in the latest Ethereum 2.0. Phase 0, expected to roll out by last month but hasn’t launched yet. Ethereum 2.0 never fails to create hype among cryptocurrency investors and analysts. 

PoS Has Higher Complexity Than The Previous PoW

Throughout the research, they have jotted some important conclusions about Ethereum 2.0. As per them, the Proof of Stake consensus mechanism has a higher complexity than the previous Proof of Work mechanism. Even though the Serenity upgrade is very elegantly furnished but from an investor’s perspective, it may be challenging to understand the operations. 

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Ethereum’s security mainly dependent on the total ETH staked, the market price of ETH. Lastly, the combined effect of both ETH stakes and ETH price – volatility. Furthermore, ETH 2.0 diminishes the requirements of hardware for participating in the ETH transactions. It reduces the tension related to hardware and electricity consumption making network participation easier than before. 

ETH 2.0 Aimed At Increasing The Participation Of Decentralised Networks 

Another significant fact that Hoban and Borgers have found is that the main objective of ETH 2.0’s specific design is to drive more participation in decentralised networks. Unlike the previous Proof of Work mechanism, the validating becomes relatively cheaper as the ETH price increases. The two of them also predicted the ETH stake rate for adequate security. Amidst all the price fluctuations and volatility, expected to be around 13.8%. 

Recommended Increase Of The Base Reward Factor

However, from a security viewpoint, ETH 2.0 is paying relatively less for security purposes when compared to ETH 1.0. However, it has again pointed out that this new upgrade is a resilience of the network when ETH is comparatively at lower prices, which means the model would be a concern when ETH is at higher prices. It has recommended reducing the Base Reward Factor to 128 because, according to them, 64 is the Base Reward Factor is too low when it comes to the security of the platform. Furthermore, they must explore alternatives for the Base Reward Factor in case of unprecedented circumstances like the collapse in the price of ETH.

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Steve Anderrson
Steve Anderson is an Australian crypto enthusiast. He is a specialist in management and trading for over 5 years. Steve has worked as a crypto trader, he loves learning about decentralisation, understanding the true potential of the blockchain.

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