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Ethereum

The Merge is delayed

In preparation for “the Merge” — a long-awaited transition from proof-of-work (PoW) to the proof-of-stake (PoS) consensus algorithm — Ethereum developers have conducted a major test on network’s mainnet.

While developers have carried out multiple tests in the past, they were largely trying a new code on dedicated clones of the Ethereum blockchain known as “testnets”. This time, however, the team conducted the test on a version of the actual mainnet.

During the experiment a so-called “shadow fork” has been created, meaning that some of the validators intentionally split off from the main network to test the upgrade without affecting the rest of the network.

Following the tests, Ethereum Foundation member Tim Beiko said that “the Merge” will not happen in June as it was previously expected, but will likely come a few months after. The Ethereum team has been planning a switch to proof-of-stake since at least 2016, but the actual transition has been delayed multiple times.

While “the Merge” will change the consensus algorithm to proof-of-stake, it won’t increase network’s transaction throughput, meaning that transaction fees will likely stay high giving the same amount of network activity.

The on-chain scaling solution known as “sharding” is still on the roadmap, but it was pushed back to 2023 to make sure that developers have enough time to properly test the transition to PoS.

In the last few years the mainstream media has been heavily criticizing resource-intense proof-of-work cryptocurrencies such as Bitcoin and Ethereum for their environmental impact without ever raising similar concerns regards to the traditional banking system. Since Ethereum’s move to PoS is expected to cut the network’s energy consumption by more than 99%, it should provide a much needed option for companies that want to accept cryptos, but struggle to explain to their target audience common misconceptions about Bitcoin’s energy consumption.

On the other side, proponents of the proof-of-work consensus algorithm argue that proof-of-stake is less secure due to its complexity as it requires a large set of game theory mechanics to punish malicious behavior in order to secure the network.

Regulations

India’s crypto trading volume has collapsed

India’s government has been lately tightening the grip over cryptocurrencies with the new crypto regulation coming into force earlier in April. The law imposed a 30% tax on crypto profits, while not allowing traders to offset their losses against profits. The most controversial provision — the 1% tax deduction at source (TDS) on each trade — is yet to take effect on July 1.

Just 10 days after the new tax came into effect, the trading volume on local crypto exchanges has plummeted with India’s largest centralized exchange WazirX experiencing a 72% drop.

Due to regulatory pressure, the largest US-based cryptocurrency exchange Coinbase has suspended support for UPI payments to buy cryptos on its India’s app just a few days after rolling out the new feature. The Unified Payments Interface (UPI) is India’s payment system for instant transfers of funds between bank accounts.

In other news

  • Uniswap Labs — the company behind the largest decentralized exchange by trading volume Uniswap — is facing a class action suit from investors who lost their funds by buying tokens of various sketchy projects and Ponzi schemes. The lawsuit alleges that Uniswap’s fee structure encourages fraud, and the DEX is selling unregistered securities.

  • The Wikipedia community conducted a poll whether the online encyclopedia should continue accepting cryptocurrencies as donations. As a result, 232 users, or 71% of voters, requested the Wikimedia Foundation to stop accepting crypto donations due to environmental concerns. The non-profit organization said to provide an update on the matter at the end of April.

  • Ethereum-based mixing protocol Tornado Cash started blocking addresses sanctioned by the U.S. Office of Foreign Assets Control (OFAC) from interacting with its official website. Notice that sanctioned addresses can still use the mixing service by interacting with the immutable smart contract directly on the blockchain.

  • MetaMask cautioned its users that automatic Apple iCloud backups of its wallet is an additional attack vector that can allow hackers to gain access to the password-encrypted MetaMask vault, which is meant to only be used locally on the device. The MetaMask team advised users to disable iCloud backups for its wallet.

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