The good news is Ethereum 2.0 is coming soon.
The bad news?
There's an unfortunate side to this upgrade.
This has led to a barrage of questions.
What is Ethereum 2.0?
What happens to my existing Ether?
And how can I profit from this upgrade?
To understand this, we need to know
the fascinating way Ethereum works.
Ethereum is what's called a general-purpose blockchain,
a blockchain where other applications called
dApps can be built on top.
I like to think of Ethereum as the
electric grid, all the wires, poles, and electrical substations.
And Ether, the token, is like the electricity
running through the power grid,
powering the ecosystem.
Transactions of ether are stored
and validated on a ledger.
Now, you can think of the ledger as
this huge spreadsheet containing every single transaction ever
done in the history of Ethereum.
And you can guess it takes a whole lot
of work to keep up with that massive spreadsheet.
The upkeep and validation process is called consensus.
Currently, in Ethereum, consensus is done by minors.
These high-powered computers that race to solve
tough math problems called hash problems.
The first to solve the problem gets the right
to fill out the next sheet on the spreadsheet.
This is called minting a block of transactions.
In exchange for minting a block,
miners are then paid in Ether for their hard work.
But this comes with an issue.
It's wasteful.
Imagine this Rubik's Cube is one
of those tough hash problems.
You and 100 other miners are lined up,
fighting to solve it as quickly as possible
until one of you finally gets it.
That winner gets the reward.
They get to complete the block of transactions.
But there's a problem. It's expensive.
Everyone else's hard work trying to solve this
Rubik's Cube is a complete waste of resources.
This is where Ethereum 2.0 comes in.
This upgrade to proof-of-stake takes out the
need for strong computers and massive electricity requirements and
exchanges it for locking up or staking your crypto
in order to help with consensus.
At the end of the day, we have the same result.
This nice, safe ledger of transactions.
But the way we get there is much better.
However, this isn't the only problem with Ethereum, and
it unfortunately won't solve one of the biggest problems
of them all, which we'll discuss in a minute.
Due to the complexity of upgrading Ethereum, which
is a whole lot like trying to swap
out a jet engine mid flight.
The upgrade will happen in a few phases.
Phase zero is also known as The Beacon chain.
This is an entirely new proof-of-stake blockchain.
You can think of it like a
new brain overseeing the entire network.
This has already happened.
Phase one is known as The Merge.
This is next and will be massive.
The shift to proof-of-stake, and merging of transactions.
Phase two is Sharding.
In this phase, the database will split
into 64 different channels in order to
process more transactions. To make things easier,
let's say you take the same single
lane road every single day to work.
Sometimes it flows just fine.
Other times there's massive traffic jams and you're
sitting there frustrated because you can't get through.
This is how Ethereum currently works, a single
lane on its way to do the work.
Now, imagine if your single lane route to
work could expand to 64 different lanes, allowing
way more traffic to flow through.
This is essentially Sharding.
Now, the question is, when in
the world will this happen?
It feels like we've been about
to upgrade for years now.
Can we really trust it soon?
Well, we know phase zero, the Beacon
chain is already live and running.
The Merge is then expected sometime in
the second or third quarter of 2022,
according to Ethereum co-founder Joseph Lubin.
Then, Sharding, that's going to be a while.
Potentially sometime 2023.
I wouldn't hold your breath on that one.
Now we're going to talk about how
you can profit from the upgrade.
But first, what this upgrade won't do.
This is extremely important.
It won't create an entirely new coin at merge.
Ether will remain the one and only coin.
However, it might see a nice little boost in price.
Your existing tokens will not be invalidated.
Don't send your tokens anywhere to someone promising
that they'll send you ETH 2.0 tokens back.
There's no such thing.
Second, and this one is unfortunate.
The upgrade will not reduce gas fees.
But how is this possible?
We're getting rid of expensive mining
fees have to go down, right?
Unfortunately, no.
The upgrade will have an impact on the consensus layer.
And unfortunately, gas fees are paid
on the execution layer of Ethereum.
Those fees that you're paying right now
will simply go to people staking Ether
instead of miners like it does currently.
Now, this isn't exactly the end of the
world because layer-2 technology is getting better
and better, and these services offer access to
Ethereum with far lower fees already.
But it does beg the question, if this
upgrade doesn't fix gas fees, what's the point?
Is it even worth caring about the upgrade?
Well, there are a few essential reasons, but before we
cover those, I have a bit of a workaround.
One of the biggest downsides to NFTs are gas fees.
Today sponsor FTX has that figured out.
They allow you to trade not only cryptos but NFTs
for insanely cheap, up to 85% less than competitors.
On top of this, they're constantly doing NFT giveaways
like their NFT Oprah or something, and you get
free crypto with every trade over $10.
Check them out and support the channel
with the link down in the description.
So if the Ethereum upgrade doesn't help
with its gas, what does it do?
First, it makes Ethereum eco-friendly.
The transition to proof-of-stake makes the
network 2000 times more energy efficient, requiring 99.9%
less energy to process transactions. That's amazing.
That also means more institutional investors will likely buy
Ether as they'll get less backlash by investing in
something that isn't bad for the environment.
Second is scalability.
Remember that 64 lane highway?
The upgrade will help network
congestion and settlement times.
Theoretically, this will allow for up
to 100,000 transactions per second.
Where it currently can support around 30.
Third is higher security.
Now this one has a bit of debate, but it
seems to mostly come down to a few misconceptions.
Ethereum currently is extremely secure, but
so is proof-of-stake.
An argument can be made that proof-of-stake
is actually more secure because if an
attack happens, proof-of-stake Ethereum can simply
upgrade and remove the attacker's coin.
So we understand what the upgrade
is, isn't and how it works.
But how can we actually profit from the upgrade?
The easiest method is simply holding. Let me explain.
Currently only 8.3% of Ethereum is being staked.
That's considered off the market.
The higher percentage stakes generally the better.
Because there's less ether floating
around ready to be traded.
Staking lowers the available supply.
8.3% is a low amount,
which means there's room to grow.
Many of the largest cryptos have 70% plus
of their supply staked Ether's price will go
up if it hits those levels.
Second, in the transition of proof-of-stake,
fewer Ether tokens will be minted, lowering inflation.
Combine this with the token burn mechanism that
Ethereum enacted and we have a fair bit
of upward pressure on the Ether token.
Then of course, you can stake Ethereum yourself,
which you absolutely should do if you plan to
hold long term anyways, staking rates will be between
7% and 12% APY, depending on how many people
stake, network fees, percentage of ETH burnt, and whether
you're a validator or not.
In order to get the highest rates possible,
you'll want to be your own validator.
But this is more work and you need a
fair bit of Ethereum to make it happen.
In order to be a validator, you'll
have to actually run software on your
computer or purchase server space, and you'll
personally validate transactions on the ledger.
You will be updating that spreadsheet.
The reason you make more money doing this
is you're getting paid directly from the Ethereum
protocol and doing the work yourself.
The downside is you need 32 ETH to make it work.
If you are interested, there are tutorials all
over online on how exactly to get started.
Now, most people don't take this approach, so instead you
can stake a theme in a variety of DeFi services
for a solid yield and essentially no work.
Or if you're looking for the easiest way possible,
you can stick in a centralized exchange, but they
tend to take much higher fees than anyone else.
Overall, Ethereum 2.0 is a massive upgrade,
a shift to proof-of-stake,
the eventual introduction of shards and
more accessible staking will help unlock
the true potential of Ethereum.
But this doesn't solve everything. Gas fees, which we'll have
to look to layer-2 providers to solve but nevertheless
there's a ton of upwards pressure on the coin from
lower network inflation to more token burning and increased popularity
in NFTs like Meta's new launch on Instagram. It really
is an exciting time in crypto. If you'd like to
learn even more about this space check out my Patreon
linked in the description. My goal is to help give
you all the tools you need to understand how to
take advantage of the crypto space and better your future.
There we talk about the newest strategies, have hundreds
of success stories, coaches who help everyone from beginners
to experts, exclusive research reports, trade signals and
a whole lot more for an insanely cheap price
that will be linked in the description.
Just make sure you grab your spot ASAP. I'd
like to thank you so much for watching.
I'm Max Maher and I hope you have a profitable day!