Following yesterday’s mainnet shadow fork, Ethereum is inching closer to becoming a proof-of-stake (PoS) consensus network. Meanwhile, the price of Ethereum has started to stabilize following a week of volatility. This week’s decline has put the price of Ethereum at a critical point. The smart contract tokens could follow suit if the crypto market keeps falling.
PoS Shadow Fork is a “Historical Event”
Previously, developers have mainly been testing out the significant changes on testnets. However, on Monday, they started testing the actual mainnet to see how the code would work on the blockchain.
Since the developers wanted to test the changes thoroughly, they created a shadow fork. According to Paritosh Jayanthi, one of the developers, its purpose was to stress test the assumptions about the various testnets and the mainnet.
The Ethereum mainnet’s shadow fork is part of a multistage process, the merge, that aims to move the network to a PoS consensus algorithm. Notably, the final stage will happen in the second quarter of 2022.
The shadow fork is a crucial step in the development of the Merge. Its outcome is needed to determine the timing of the final merge. The shadow fork has completed over 4 million transactions and has connected over 2 million wallets throughout its running. Furthermore, it has completed 14.5 million blocks at a 14.2-second average.
Van Der Wijden, the Ethereum Foundation developer who came up with the shadow fork, tweeted earlier on Monday that it is a “historical event.” In the past, the foundation built shadow forks of the Görli testnet, a decentralized application testing blockchain with proof of authority.
What is Changing for Ethereum?
With the following proof of stake update, users will be able to confirm transactions based on how many coins they contribute or stake to the network. Users who stake more coins have a better chance of being picked to validate transactions on the network and earn a reward.
Ethereum currently has both proof-of-work and proof-of-stake chains operating concurrently. Even though both contain validators, only the proof-of-work chain presently handles user transactions. Ethereum’s blockchain will entirely transition to the proof-of-stake chain known as the Beacon Chain when the genuine merging is complete.
After the actual merge, Ethereum’s crypto mining would be rendered obsolete, significantly reducing its environmental effect. Because fewer coins are predicted to be created, the quantity of new Ether would likewise likely decrease. Furthermore, blockchain security against future attacks is expected to increase. In addition, institutional investment in the Ethereum network is likely to grow.
Ethereum’s Price is on a Downslide
After being rejected at the 200-day Simple Moving Average (SMA) of $3,491, the price of Ethereum has plummeted by nearly 17%. This move follows repeated rejections since January 13, and it is a noteworthy development that has driven it below the volume profile’s high volume node of $3,136.
However, the recent drop has driven ETH into the immediate support confluence at approximately $3,000, encompassing the $2,820 to $2,966 demand zone and the 50-day and 100-day SMAs. Consequently, investors should expect a rebound from this level to spark another run-up.
The resultant rise must pass through the high volume node at $3,136 before confronting the 200-day SMA at $3,491. In certain situations, this move may penetrate higher to fill the low volume node, reaching up to $3,703. Only in a highly optimistic scenario would the Ethereum price retest the psychological milestone of $4,000.
Over the last day, the global cryptocurrency market capitalization has fallen 1 percent to $1.86 trillion. According to CoinMarketCap statistics, the overall crypto market volume grew by 6 percent in the previous 24 hours to $99.44 billion.