Everything you need to know about Ethereum 2.0 in 2020

Phase 0 of Ethereum 2.0 will be launched as early as the end of the second quarter of this year;

Ethereum 2.0 is the PoS version of the current Ethereum mainnet, and introduces fragmentation technology to improve network throughput;

According to Ethereum founder Vitalik Buterin, once the two networks are integrated, the introduction of PoS will result in more than 10 million ETH being locked in the protocol;

While risks remain, several mechanisms, including an anti-correlation penalty system, can prevent ownership concentration issues.

Phase 0 of Ethereum 2.0, the first step in a multi-stage rollout of broad protocol evolution, is approaching a major milestone.

Preston van Loon, CEO of ethereum 2.0 client implementation team Prysmatic Lab, told The Block that the plan will soon be live on the main multi-client testnet. Talking about the future, he expects Phase 0 to be launched by the end of the second quarter of 2020.

Phase 0 mainnet was originally scheduled to launch on January 13, 2020, following a call from Ethereum 2.0 executors in June 2019. However, the launch was delayed due to a last-minute decision by developers in October 2019 to reduce the number of shards (a key attribute of the ethereum 2.0 blockchain) from 1,024 to 64.

This change was made by the developers to speed up communication across shards, but the extra work caused delays in mainnet launch.

Preston van Loon told The Block that at present, the single-client testing period of the project is nearing completion. Developers will soon implement a major multi-client testnet that will run for at least two months before mainnet launch.

He said: “The update for phase 0 is that all configuration specifications are finalized, we have frozen all expected features, and standardized on the encryption library. The Ethernet test network is now running the latest data.”

While the exact timeline is still subject to change, Preston van Loon expects to launch the mainnet by the end of the second quarter.

There are currently eight Ethereum 2.0 clients, many of which have already begun testing their functionality.

For example, Prysmatic Labs’ Prysm launched the “Sapphire” testnet in June 2019. According to an update from Prysmatic Labs on Jan. 31, the testnet now has over 35,000 active validators. Sigma Prime’s Lighthouse and Status’ Nimbus are also running their own testnets.

In December 2019, Parity's Shasper connected to Prysm on the Sapphire testnet, making Sapphire the first public multi-client Ethereum 2.0 testnet. But Preston van Loon made it clear that they have not seriously attempted to run a single multi-client testnet.

“We won’t be pushing this single multi-client testnet until we have a full picture of cryptographic library standardization. This will be done in a few weeks,” he said.

“I’m optimistic that we can push this work towards the end of February with a multi-client testnet. We will then run a testnet for several months before certifying the mainnet launch.”

Preston van Loon said there are some stringent requirements that need to be met before the Phase 0 mainnet launch. It is worth noting that two or more compatible clients need to run a multi-client testnet together for at least two months. Everyone has confidence in this network.

Other ecosystem members also have to sign the agreement because client executor approval is required, auditors are required to check the security of the code, and the Ethereum Foundation requires consent.

Preston van Loon sees the measures as a "confidence booster" to reassure stakeholders that they will not lose out as a result of the new system.

Ethereum co-founder Vitalik Buterin echoed Preston van Loon's optimism, adding: "Ethereum 2.0.0 development is progressing well."

The last big challenge for developers to tackle is peer-to-peer networking, Buterin told The Block.

“The problem with the peer-to-peer network is that a lot of information from all the validators adds a lot of bytes to the network. Even though it’s less than a few megabytes per second, we’re trying to reduce that,” he said.

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Simplifying Ethereum 2.0: Proof of Stake and Sharding

Ethereum 2.0 is the proof-of-stake (PoS) version of the current Ethereum mainnet, which introduces sharding to increase the throughput of the network.

Preston van Loon said: "I've always wondered why Ethereum isn't the biggest blockchain. I think the reason is that it leaves a lot to be desired in terms of user experience, and it doesn't scale very well...I guess The trading price of ETH will fall, not only because of the uncertainty of Ethereum 2.0, but also for other reasons.”

According to him, the Ethereum 2.0 update is precisely to address these issues.

As The Block researcher Matteo Leibowitz previously pointed out, PoS is theoretically superior to proof-of-work (PoW) in many ways. It consumes less energy, is easier to reason about from a security perspective, is less expensive to participate, and requires sharding due to its final nature.

The new sharding structure is designed to improve the scalability of the Ethereum blockchain.

Preston van Loon mentioned in a blog post that in the Ethereum 1.0 system, every node running on Ethereum must process every transaction that moves through the network. This approach, while decentralized and secure, limits the scalability of the network and increases the risk of overall system congestion.

Sharding offers a solution to the scalability problem without compromising the security and decentralized nature of the network, he said.

In Ethereum 2.0, there will be one central blockchain, the beacon chain, which coordinates all 64 sidechains called "shards". Each shard will act as a complete PoS system, containing an independent state and transaction history. Each node only processes transactions for a specific shard, rather than processing all network transactions.

Preston van Loon also said: “Ethereum 1.0 doesn’t scale very well. On a global scale, it doesn’t support any large use cases. With Ethereum 2.0, you will increase throughput by the number of shards you have. We're launching 64 shards, so you'll have 64 times the capacity."

Currently, there are several alternative solutions to Ethereum 2.0, including Polkadot, NEAR, and Avalanche. NEAR in particular takes a similar design approach to Ethereum 2.0 - they both have a beacon chain, shards, and shared blocks that provide input to the beacon chain.

But despite these similarities, the two agreements have very different focuses, according to Buterin.

“NEAR aspires to have more application-specific protocols, whereas Ethereum’s approach is more similar to BTC. So in Ethereum one has a simple base layer and can use a programming language or a second layer to Build something else."

Additionally, Buterin argues that many alternative solutions have yet to recognize that the longevity of a project depends more on the community than the underlying technology.

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What will happen after the Phase 0 mainnet launch?

According to an article on EthHub, Ethereum 2.0 is rolling out in stages:

• Phase 0 will have two active Ethereum chains: the current PoW main chain and the Ethereum 2.0 beacon chain.

• Phase 1 will focus on the construction and deployment of the 64 shard chains, although the sidechain will only serve as a data processing layer, with no shard state enforcement or account balances.

• Phase 2 will introduce structured chain state, smart contracts, an EWASM-based virtual machine, and other features that bring the entire system together and enable transaction processing on sidechains. Any plans beyond Phase 2 are still likely to undergo major revisions.

Buterin also told The Block that, in addition to Phase 0, the Ethereum 2.0 team is already researching and developing the specifications for Phase 1 and Phase 2, and the work on Phase 1 is now largely complete.

"The core design of these stages has been determined for quite some time. There are just some details that need to be optimized," he said.

“For example, developers are still optimizing the Proof-of-Custody game. It’s a fairly new mechanism to ensure blocks are cleaned and validated before being canceled.”

Also, the data availability check protocol is still in the process of being optimized. Developers need to ensure that there is enough data to build an entire block.

"It's never been done before," Buterin said. "We hope to have a customer that will make this happen at some point."

Another key research question concerns integration between the Ethereum 1.0 and Ethereum 2.0 chains.

According to the current method, the two chains will not be merged until the second stage. But Buterin noted that the community "wants Ethereum 1.0 and Ethereum 2.0 to work together, not as separate ecosystems for a long time to come."

On December 19, Buterin proposed a plan to accelerate the merger of Ethereum 1.0 and Ethereum 2.0. In the new process, the Ethereum 1.0 chain will exist in the Ethereum 2.0 system as a shard chain. There will be a new "Ethereum 1.0-friendly validator" maintaining both the older version of the Ethereum 1.0 node and the newer version of the Ethereum 2.0 beacon chain.

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upcoming migration

In terms of user migration, the current design features a one-way bridge from Ethereum 1.0 to Ethereum 2.0.

But Preston van Loon said the motivation for the migration would depend on the type of mover.

For example, Stakers are encouraged to migrate early because the reward is higher when the number of valid verifications is lower. On the other hand, building decentralized applications (dapps) within Ethereum will be attracted by the high volume of Ethereum 2.0 in Phase 2 (i.e. when state execution and smart contract platforms are implemented).

"But if decentralized applications don't have a capacity problem, then they have no incentive to move forward. Because they want to stay where the users are. In the worst case scenario, I think at some point there will be a big problem," he said. Migrating at scale, not choosing to migrate. We’re just bringing everyone together and separating the connections between the two.”

While designing the migration process is a complex technical issue, both van Loon and Buterin wanted to design a relatively smooth transition experience for users.

"On the back end, it's a very complex process," van Loon said. "But for the user, it's just a few clicks of a button to use a new client or provider. It has to be easy to do, otherwise people won't do it."

Buterin agreed, but noted that for a short period of time, the system may not have any transactions.

"The challenge is mostly on the client and application developers. If the migration is technically solved, it's intuitive. But the migration can result in a period of one to two hours where no transactions happen," he said.

• Over 10 million ETH locked on Ethereum 2.0

A previous Bitcoinist report said that, based on Buterin's rough estimates, the move to a PoS model could lock up around 10 million ether.

In an interview with The Block, Buterin predicted that after the merger of the Ethereum 1.0 and Ethereum 2.0 systems, the total amount of Ether pledged will be well over 10 million.

He said: “My guess is that in phase 0 we will see a small amount of ether being staked, maybe a few million. But in phase 1, especially post-merger, it could be more than 10 million .”

Meanwhile, the Ethereum Foundation is doing economic modeling to get concrete numbers on validator costs and rewards, but most of the information will only be available after the Phase 0 mainnet launch.

He said: “We recognize that there is only so much information that can be gained through analysis alone. One of the reasons we want to do Phase 0 before Phase 1 is that we want to know what exactly is going on before there is a lot of activity on-chain. How many people will be involved."

So far, Ethereum 2.0 does not have a fixed release schedule. But Buterin believes that because the Ethereum network is not used to store value, it is used to build applications. Therefore, it would be better not to have a fixed publication time.

He said: “I think people are looking more at the level of security than at securing a large number of issuances. If we say everything is transaction fees, then if there are almost no transaction fees for a period of time, then the network is not secure for that period of time. .And in our model, when people stake, the interest rate is higher.”

Buterin added that this could be an alternative to ethereum in the future. Because in Ethereum 2.0, a large amount of Ether is pledged instead of being stored in other application protocols such as MakerDAO and Uniswap.

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Concentration risk

Now that Ethereum is ready to transition to the PoS system, the possibility of equity concentration needs to be considered. This possibility would pose a serious security risk to the protocol.

Buterin explained that there are several mechanisms that can inhibit the occurrence of ownership concentration.

First, in a sharding system, the number of transactions a person has to process is proportional to the amount of ether he has staked. So even with merging, they still need to validate the same amount of data; merging doesn't save them any time or effort in this regard.

Second, Ethereum 2.0. has an anti-correlation penalty system. In this system, the more validators that go offline at the same time, the heavier the penalty. Therefore, putting a large stake in one service or exchange is riskier.

Finally, developers are trying to improve the network design to make it easier and cheaper for users to run and stake Ethereum 2.0 nodes.

However, risks remain, according to Buterin.

“Since the beginning, concentration of ownership has been one of our concerns. We have built different mechanisms into the protocol to prevent concentration of ownership. But despite this, many people will get lazy, and we will see Centralized providers will be staking a lot.”