Summary
Ethereum 2.0 is a long-awaited upgrade to the Ethereum (ETH) network that was expected to see major improvements in terms of the overall network functionality and experience. Some of the most significant upgrades include the shift to Proof of Stake (PoS), sharded chains, and a new blockchain at the center known as the Beacon Chain. All this and more are scheduled to be implemented through a carefully organized roadmap.
But that is only a small part of the issue. Since Ethereum is one of the most popular digital currencies ever, there are important details about the definition of Ethereum 2.0 and the extent of its impact on the digital currency system as a whole.
the introduction
Since the launch of the Ethereum network, the development of new technologies in the form of decentralized applications (DApps) and other blockchains has expanded significantly. Importantly, many of these technologies are built on the Ethereum network. Looking at the biggest decentralized finance (DeFi) innovations – a wide range of them are running on the Ethereum network.
But unfortunately, scalability issues started to appear. In light of the high number of transactions on the Ethereum network, as well as the costs of these executed transactions (paid in processing fees). If Ethereum is to be considered the platform that drives the next generation of the Internet, then the economics need to make sense. Otherwise, use may become impractical.
This is where the Ethereum 2.0 upgrade comes into play. The proposed ETH 2.0 upgrades to the Ethereum network are supposed to primarily address scalability issues. These improvements will create some variation from the current Ethereum version, as they are implemented through a carefully structured roadmap.
What is Ethereum 2.0?
Ethereum 2.0 (also known as Eth2 or Serenity) is a long-awaited upgrade that offers, among other things, improved scalability to the network. By implementing several optimizations, it is expected to enhance speed, efficiency and scalability without sacrificing security and decentralization features.
This version of Ethereum was on the horizon, but took some years to launch. The main reason for this is that scaling the blockchain in a secure and centralized way is a challenging task.
Fortunately, Ethereum 2.0 aims to solve this problem by implementing some very important features. These characteristics contribute to some differences between known and expected Ethereum network properties.
What is the difference between Ethereum and Ethereum 2.0
The biggest differences between the Ethereum network and Ethereum 2.0 include the use of a Proof of Stake (PoS) consensus mechanism, sharded chains, and the Beacon chain. Let's look at these differences in more detail.
Proof of stake
The Proof of Work (PoW) model is Ethereum's (and many blockchains) way of keeping the network secure and up to date by rewarding miners for creating and validating blocks on the blockchain. Unfortunately, the Proof of Work (PoW) model is not scalable because it requires an increasing amount of computing power as the blockchain grows.
The Proof of Stake (PoS) mechanism solves this problem by replacing computing power with some “risk.” This means that, as long as you have a minimum of 32 ETH, you can store it to become a validator and get paid by confirming transactions. If you would like to take a closer look at the Proof of Stake (PoS) and storage mechanism, see the Proof of Stake Explained section.
Retail
Anyone who wants to access the Ethereum network must do so through a node. The node stores a copy of the entire network, which means that the node downloads, calculates, stores and processes every transaction that has been performed since the launch of the Ethereum network. So you as a user don't need to run the node to make a transaction, it slows down everything.
Hashed chains are like other blockchains, except that they include subsets of the entire blockchain. This will help nodes that will only manage a share or a small portion of the Ethereum network. This should increase transaction throughput and overall capacity of the Ethereum network.
Beacon series
With segmented threads running in parallel, you must ensure that they are in sync with each other. Well, the beacon chain takes this into account by providing a consensus model around all the hashed chains that are running in parallel.
The beacon chain is a new blockchain that plays a pivotal role in Ethereum 2.0. Without it, sharing information between parts would not be possible and there would be no scalability. For this reason, it is reported that it will be the first feature ported to Ethereum 2.0.
The path to the Ethereum 2.0 upgrade
The Ethereum 2.0 upgrade will not be launched all at once. Instead, it will be launched in three phases, with each phase having some distinct characteristics to ensure the success of the new Ethereum network.
Stage 0
The first stage, or stage 0, will be dedicated to launching the beacon chain and is essential for the functionality of sharded chains. There will be no sharded chains yet, but the beacon chain will start accepting validators (i.e. vaults) via a deposit contract that works in one direction only.
It is important to note that all registered validators who have staked their ETH coins will not be able to “unstake” until the forked chains are fully implemented. This means that ETH will be reserved from validators until the next phase begins.
The Beacon chain was launched on December 1, 2020 and ran in parallel with the mainnet. After its launch, the Beacon chain did not process mainnet transactions. Instead, they worked in parallel; To reach consensus by approving auditors and their account balances.
Stage 1/1.5
In fact, the next phase is a combination of the two phases, Phase 1 and Phase 1.5. Phase 1 introduced sharded chains that allow validators to create blocks on the blockchain via a Proof of Stake (PoS) mechanism. Phase 1.5 comes when the Ethereum mainnet officially introduces sharded chains and begins to transition away from Proof of Work (PoW) and Proof of Stake (PoS) mechanisms.
Implementation of Phase 1/1.5 will begin in 2021.
Merger
The merger is an important step for Ethereum 2.0 and is the closing stage of the shift away from Proof of Work (PoW). The merger will contribute to the transformation of the Ethereum blockchain from a Proof of Work (PoW) consensus mechanism to a Proof of Stake (PoS) mechanism.
The merger involves switching the current protocol of the Ethereum mainnet to the Beacon chain. This is a big change as Ethereum transactions will now be discounted on the new Proof of Stake network. New ETH tokens will also be minted by nodes on the network, and a large amount of Ethereum tokens will be stored in a pool in order to secure the network and audit transactions.
A merge is not the same as a chain split that may result in two different versions of the blockchain. Ethereum will continue as a single blockchain, and all user transaction records will be merged. Transaction records stored on the mainnet will not be lost, so the user does not need to take any action to protect their assets.
Stage 2
The final phase will be Phase 2, which comes when the Ethereum 2.0 upgrade fully supports the component parts and the Ethereum network becomes official. The sharded chains will be able to work with smart contracts as well, allowing developers of decentralized applications and other technologies to seamlessly integrate with the Ethereum 2.0 upgrade.
Phase 2 is expected to be implemented after the merger or later.
Concluding thoughts
The Ethereum 2.0 upgrade is critical to the Ethereum network for several reasons, including scalability in particular. Without the new features of Proof of Stake (PoS), sharded chains, and the beacon chain, the Ethereum network may eventually become unsustainable and no longer be the leading smart contract platform in the cryptocurrency ecosystem.
The Eth2 launch will take some time, and may take longer than expected. The good news is that this is already being worked on and the Ethereum network developers are doing their best to launch this upgrade.