Cryptokoin.com – Although it has been a long time, Ethereum 2.0 is finally on the horizon. The major update aims to address the scalability and security of the network through a series of changes to its infrastructure. Most importantly, there will be a transition from the proof-of-work consensus mechanism to the proof-of-stake model.
What is Ethereum 2.0?
Ethereum 2.0, also known as Eth2 or “Serenity”, is an upgrade of the Ethereum blockchain. The update aims to increase the speed, efficiency and scalability of the Ethereum network. Thus, it will be able to process more transactions.
Ethereum 2.0 is rolling out in several phases and the first update is expected towards the end of 2020.
How is Ethereum 2.0 different from Ethereum?
Ethereum 1.0 will use a consensus mechanism known as proof of work (PoW), while Ethereum 2.0 will use a proof of stake (PoS) mechanism.
What is the difference between proof of stake and proof of work?
Blockchains like Ethereum need to verify transactions in a decentralized way. Ethereum, like other cryptocurrencies, currently uses a consensus mechanism known as PoW. In this system, miners use computer processing power to solve complex mathematical puzzles and verify new transactions. The first miner to solve a puzzle adds a new transaction to the record of all transactions that make up the blockchain. They are then rewarded with cryptocurrencies. However, energy use can be intense in this process.
PoS differs in that instead of miners, transaction validators receive a stake in crypto for the right to verify a transaction. These validators are chosen to propose a block based on how much crypto they hold and for how long.
Other validators can then verify that they saw a block. A block can be added to the blockchain when there is sufficient confirmation. Validators are then rewarded for successful block suggestion. This process is also known as “forging” or “minting”.
The main advantage of PoS is that it is much more energy efficient than PoW2. This also means that you don’t need a lot of computing power to secure the blockchain.
How will Ethereum 2.0 scale better than Ethereum 1.0?
One of the main reasons for upgrading to Ethereum 2.0 is scalability. With Ethereum 1.0, the network can only support about 30 transactions per second; this causes delays and congestion. Ethereum 2.0 promises up to 100,000 transactions per second. This increase will be achieved through the implementation of shard chains.
How will Ethereum 2.0 be more secure?
Ethereum 2.0 was designed with security in mind. Most PoSs have a small set of validators, providing a more centralized system and reduced network security. Ethereum 2.0 requires at least 16,384 validators, making it much more decentralized and therefore secure.
However, according to Lior Yaffe, Jelurida co-founder and chief core developer of Ardor and Nxt blockchains, there is a potential vulnerability in the level of engagement rates in the network. Security audits of the Ethereum 2.0 code are carried out by various organizations, including blockchain security firm Least Authority.
The Ethereum Foundation is setting up a dedicated security team for Ethereum 2.0 to investigate potential cybersecurity issues in the cryptocurrency. Ethereum 2.0 researcher Justin Drake stated in a tweet that the research will include “fuzzing, bounty hunting, pager duty, cryptoeconomic modelling, applied crypto analysis, formal validation.”
How will the Ethereum 2.0 update take place?
Following a series of testnet launches including Topaz, Medalla, Spandina, and Zinken, the full rollout of Ethereum 2.0 will take place in three phases: Phase 0, 1 and 2. Phase 0 is targeting a 2020 launch date, with phases to come in the coming years.
In Phase 0, Beacon Chain will be implemented. This stores and manages the register of validators as well as deploying the Proof of Stake (PoS) consensus mechanism for Ethereum 2.0. The original Ethereum PoW chain will continue to run simultaneously with the Beacon Chain, so there will be no disruption to data continuity.
Phase 1, which will be implemented in 2021, will enable the integration of PoS shard chains. The network is expected to launch with 64 shards (which provides 64 times the throughput of Ethereum 1.0), but will not initially support accounts or smart contracts.
With Phase 1.5, an interim update scheduled for 2021, the Ethereum mainnet will officially become a shard and transition to proof of stake.
With Phase 2 starting in 2021/22, parts will be fully functional and compatible with smart contracts. It will also include adding Ether accounts, enabling transfers and withdrawals, implementing cross-track transfers and contract calls. It will create execution environments for scalable applications built on Ethereum 2.0.
In September 2020, news came that the Spadina testnet was experiencing issues with its launch. Spadina is a short-term testnet designed to experiment with genesis, i.e. the creation of the first block, on Ethereum 2.0. It differs from the larger Medalla testnet, which is a public sandbox that represents the working version of the network. Issues with the Spadina testnet included low engagement, “confusion” and “invalid deposits”.
Ben Edgington, product owner of the ETH 2.0 client Teku at ConsenSys in October 2020, stated that the Medalla testnet “suffered from very low engagement.” He added that “people are getting a little bored with testnets” and that “it’s time to move on.”
When will Ethereum 2.0 be released?
According to a blog post from the Ethereum Foundation, Ethereum 2.0 will be released on December 1. The launch was conditional upon meeting certain criteria; By November 24, there were supposed to be 16,384 validators on the network and each would have 32 ETH, with a total of 524,288 ETH staked. This requirement was officially met on 24 November at around 05:30 Turkish time, and it has been confirmed that ETH 2.0 will be introduced on 1 December.
As part of the preparations for the launch, in November 2020, the Ethereum Foundation released version 1.0 specifications for Ethereum 2.0, including a Launch Pad where users can sign up to become an Ethereum 2.0 validator. It has also released the main ETH2 deposit contract.
However, the staking speed was slower than expected; According to Lito Coen, founder of CryptoTesters, running an Ethereum 2.0 node, which was initially the only staking option, was a prospect that regular users found “scary”.
Also, the 32 ETH that needed to be staked was an expensive amount with ETH currently rallying as well. While this is not a problem for Ethereum whales, those with larger amounts of ETH were somehow excluded from participation.
The future of Ethereum 2.0
Ethereum co-founder Vitalik Buterin has laid out a roadmap for how the next five to ten years might turn out to be for Ethereum 2.0.
Vitalik Buterin says there has been a solid transition over the past two years from “blue sky” research to understanding what is possible, concrete research and development, optimizing certain principles we know to be applicable and putting them into practice. He says most of the challenges are now “increasingly in the development periphery, and the share of development will continue to increase over time.”
How can Ethereum 2.0 affect ETH price?
For some, the launch of ETH 2.0 is just what the cryptocurrency needs. According to the post in Decrypt, Jamie Anson, founder of Nifty Orchard and organizer of Ethereum London, said, “Ethereum will have answered all questions after achieving scalability through layer-2 technology or ETH 2.0. The ball will burst,” he said.
In other words, more scalability means more usage, which means more demand. This, in theory at least, should push the price of Ethereum to new heights. “When ETH 2.0 and rollups work together, there will be 100,000 transactions per second,” Anson said. This will mean a completely seamless experience for people,” he added.
Matt Cutler, CEO of Blocknative, a company focused on the complexity of Mempool, is equally optimistic as gas fees could drop with the launch of Ethereum 2.0. “Our client base sees lowering transaction fees and increasing network efficiency as major areas of opportunity,” he said, according to Decrypt.
Moreover, taking into account major milestones, the ecosystem will strengthen the Ethereum developer momentum. “This will have a long-term bullish effect on the price of ETH, despite the short-term volatility,” Cutler said.
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