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Despite tomorrow's Ethereum update postponing the difficulty bomb, Coinbase introduces 'ETH2'

3 min reading

However, ETH2 is not a new cryptocurrency, and the exchange seems to be preparing for the transfer of Ethereum to Proof-of-Stake

Cryptocurrency exchange  Coinbase has included a mirrored version of the Ethereum blockchain's native coin Ether (ETH) to its crypto price index, in just time for a vital network update on December 10.

The symbol, termed "ETH2," seemed to be monitoring the original Ether market data in real-time. For example, the cost of purchasing ETH2 was the same as that of purchasing ETH. In the meantime, their market capitalization, volume, circulating supply, and price fluctuations were all the same.

However, unlike the original, the ETH2 token has no Trading Activity, Popularity Score, or Typical Hold Time, suggesting that its purpose, for now, is to simply track ETH market data until mid-2022.

That is most likely as ETH2 appears to be acting as the native token of Ethereum's impending upgrade, termed Ethereum 2.0, which is anticipated to be fully operational by June 2022. The Coinbase index listing, on the other side, looks to be closer to "Arrow Glacier," a split that would provide developers more time to get ready for Ethereum 2.0.

Prior Ethereum 2.0

The Arrow Glacier upgrade seeks to postpone a so-called "difficulty bomb," a predefined incentive built into the Ethereum blockchain since its inception in 2015 that would make it difficult for anyone to mine Ether. As a result, if the BOMB is triggered, it will slow down the Ethereum network for as prolonged as it is proof-of-work.

Tim Beiko, one of the Ethereum core developers operating on the update, speculated that Arrow Glacier might be the final upgrade before Ethereum 2.0 officially launches next year.

To maintain Ethereum's public ledger, nodes must validate every transaction in the current version. However, the Ethereum 2.0 upgrade will introduce "sharding," which would divide the network into multiple segments (called shards) and assign nodes to each shard at random.

This would eliminate the requirement for each node to scan the whole chain, theoretically boosting network performance and costs. Individual shards would then share transaction data with a so-called Beacon Chain, which acts as Ethereum 2.0's backbone.

ETH2 is not a new cryptocurrency

 The Beacon Chain, which went live in December 2020, will validate transactions on each shard, supporting the whole Ethereum 2.0 network in reaching an agreement. It would also identify dishonest validators and levy penalties by withdrawing a portion of the validator's share from circulation.

Having said that, ETH2 is not a new coin and therefore would not impact the amount of ETH one possesses. Rather, as Coinbase's index listing indicates, ETH2 may wind up being a rebranded version of the original Ether, without the need for holders to switch from one to the other.

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