Many cryptocurrencies have seen an overnight rise in their values. Once people saw the potential and the actual uses, the value suddenly settled down. For example, the dogecoin price isn’t going to be as high as it is now as there are fewer applications as compared to other cryptos. The creation and launch of Ethereum opened up avenues for crypto that were still unheard of. Ethereum took the basic concept from Bitcoin and gave it a spin and developed it well till it was launched in 2015. The evolution of any technology is imminent or it can become redundant. Ethereum recognized the need to make changes to stay current and make an effort to stay on top of the altcoin pyramid. Here are the things you need to know about Ethereum 2.0.
What is the ultimate aim of Ethereum 2.0?
Ethereum 2.0 is a set of upgrades that the blockchain is looking to implement by the end of 2022 to improve scalability, speed, sustainability, and security. This upgrade will ensure resources are used to their optimum capacity.
What is different from Ethereum 1.0?
So why is Ethereum going through all this trouble to make upgrades? What is different from the 1st version? There are 2 major differences. Here is a brief summary of both.
- Proof of stake consensus – The current model of Ethereum uses proof of work consensus. This involves solving complex mathematical equations to get rewarded with Ether. This uses a lot of energy as the machines required are heavy-duty. There was some poking around by a few celebrities who pointed out that PoW is not environmentally friendly and there could be a better way. Ethereum is transitioning to a proof-of-stake consensus mechanism, where users who stake their ETH are incentivized to validate transactions and secure the network. This shift provides several benefits, including increased scalability and energy efficiency. Additionally, users can leverage liquid stake derivatives to optimize their staked ETH and earn additional rewards, potentially contributing to further network growth.
- Shard chains – Another noteworthy improvement in Ethereum is called sharding. Shard chains are vital for achieving scalability improvements. The current approach of constructing single chains with consecutive block offers enhanced security and simple facilities for verifying information. However, passing every transaction through a full node in consecutive blocks on a blockchain can decrease the speed of transactions drastically.
Sharding is used to divide the data processing duties equally amongst various nodes. This helps in carrying out parallel data processing procedures instead of doing them consecutively and wasting time.
Roadmap to Ethereum 2.0
When upgrades are being rolled out, the blockchain is vulnerable and history tells stories of collapses and huge losses at a vulnerable time. TO avoid this, Ethereum is being upgraded in stages. Let us take a look at the stages and what we can expect in each one.
Beacon Chain – The first phase is already in play and in this phase the new beacon chain or a layer of proof of stake was implemented. There are more than 222 thousand validators currently. All validators represent a stake of 32 Eth on the Beacon Chain. In an unexpected twist, PoW is also functional along with the PoS chain and there have been no data continuity issues so far.
Merging Beacon Chain with Mainnet – In the next phase, the Beacon Chain will merge with the Ethereum mainnet. This will be a validating milestone in the history of Ethereum 2.0. After the merge, transactions will continue as per usual.
Shard chains – The last stage would be to improve the scalability. This phase is expected to commence in the last part of 2022. Shard chains are expected to enhance sustainability while improving the capacity for storing and accessing data. In addition, the scalability path towards Ethereum 2.0 also focuses on layer 2 solutions such as roll-ups.
What are the benefits of these upgrades?
Apart from the obvious environmental impacts, there are a few more benefits to Ethereum 2.0. The change of PoW to the PoS chain will reduce the difficulty of hurdles and there will be more validators. The increase in validators will result in better decentralization as well. Ethereum promises better security with higher costs for compromising the network.
Final verdict on the Ethereum 2.0
There have been many rumors that Ethereum 1.0 and 2.0 are different blockchains altogether. That is simply not true. Ethereum 2.0 is a collection of upgrades and not a different blockchain. As for Ether, there is a chance a new token may be coined but there is no clarity on the matter yet. Although, the Ethereum price is expected to shoot up if all goes according to the plan.
The upgrade for Ethereum was essential as users are getting tired of ridiculously high gas prices and long validation times. Since Ethereum is an entire ecosystem, the shortcoming of this blockchain will be disadvantageous for all the projects supported by it.