What does the upcoming Ethereum 2.0 mean? why is it important

拔丝地瓜

特邀专栏作者

2020-11-30 19:02 (UTC+8)

This article is about 3468 words, reading the full article takes about 5 minutes

Ethereum is undergoing constant improvements to adapt to the changing needs of the crypto community.

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Ethereum is undergoing constant improvements to adapt to the changing needs of the crypto community.

Editor's Note: This article comes fromCrypto Valley Live (ID: cryptovalley)Editor's Note: This article comes from

Crypto Valley Live (ID: cryptovalley)"Crypto Valley Live (ID: cryptovalley)"。

, Author: Bybit Learn, translation: Li Hanbo, reprinted by Odaily with authorization.

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Ethereum introduced the concept of smart contracts and decentralized applications (DApps) to the wider community. Today, it hosts many blockchain projects, including those thriving within the framework of decentralized finance (DeFi). Now, the platform co-founded by Vitalik Buterin is facing a major transformation in order to maintain its leading position in the public chain. At this time, Ethereum began to gradually transition to Ethereum 2.0, and the new platform will be completely different.

Ethereum 2.0 is an important upgrade of the blockchain platform. During the upgrade, the current Proof of Work (PoW) consensus mechanism will be replaced by the Proof of Stake (PoS) algorithm. Beyond that, there are other structural changes involved, but the transition from Ethereum PoW to PoS is what most Ethereum users are most concerned about.

What is the difference between Ethereum 2.0 and Ethereum 1.0?

Ethereum 2.0, also known as Serenity, is advertised as an improved version of Ethereum. It will be more scalable and flexible due to the PoS algorithm. Still, the Ethereum Foundation does not want to sacrifice decentralization in order to realize more scaling potential. Therefore, the goal of the new platform is to find the ideal balance between the two.

To achieve this, Ethereum 2.0 will implement a unique architecture called sharding, which refers to a network of parallel channels working together. Each shard will have its own set of account balances and smart contracts. The method to achieve maximum decentralization will be implemented in the final stage of the upgrade.

Why does Ethereum 2.0 use Proof of Stake (PoS)?

The high demand has also led to a spike in fees on Ethereum, which surged roughly 600% from August to September 2020. Finally, due to the need for scalability, Ethereum was forced to adopt PoS instead of the current PoW. So, this is Ethereum 2.0.

The concept behind the two consensus mechanisms, Proof of Stake and Proof of Work, boils down to how network participants (called nodes) verify transactions on their respective blockchains and maintain the normal state of the platform.

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Difference between Proof of Stake (PoS) and Proof of Work (PoW)

In PoW, which was first proposed by Bitcoin in 2008 (in fact, the concept of PoW has been proposed long before Bitcoin), nodes can become so-called miners, and verify new transactions of Mempool by solving complex mathematical problems. Participants need to invest computing power to win the game and gain the right to verify the next block. In return for their efforts, miners receive rewards in the form of newly generated bitcoins or cryptocurrencies using PoW consensus."casting"Unlike PoW blockchains, PoS networks do not involve miners, as most such projects are launched with pre-mined tokens. The verification of a new block in a PoS system is called

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. Validators are nodes that participate in block creation. Therefore, in order to become a validator, a node must lock a part of the original Token. Typically, the more tokens they stake, the better their chances of being the next validator. The same approach will be adopted in the upcoming Ethereum 2.0 upgrade.

Why does Ethereum 2.0 use PoS?

As mentioned earlier, Ethereum has expanded rapidly in the past few years, and it needs to upgrade to meet demand and avoid congestion. The PoS consensus mechanism seems to be the most ideal solution at present, but the result is highly dependent on its implementation.

Ethereum is a global platform with plans to grow further, which leads to an urgent need for more scalability. Ethereum 2.0 promises to be able to process up to 100,000 transactions per second. This compares to a maximum of 15 transactions per second on average today. In general, these significant differences can only be achieved through the implementation of shared patterns.

Benefits of Using PoS Consensus

Besides the most obvious benefit being scalability, PoS blockchains are also energy efficient. This is because validators do not need to use computing power to solve the puzzle.

According to Digiconomist, as of now, the total annualized electricity consumption for running Ethereum transactions has reached nearly 12.6TWh. Even though it is more than 6 times less energy efficient than Bitcoin, it still requires a lot of electricity and essentially does not generate anything other than packaged transactions.

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What is the transformation of Ethereum 2.0?

Therefore, Ethereum 2.0 will be rolled out in three phases, including a mid-phase. Earlier this year, the platform launched a series of testnet networks including - Topaz, Medalla, Spadina and Zinken. The goal is to get an intuition of what the future platform will look like and what problems might be encountered. In fact, most of these trials had several issues that needed to be addressed. The problems included timing issues on six servers on Medalla's testnet.

The mainnet launch of Ethereum 2.0 is scheduled for the end of 2020. Ethereum also confirmed the launch date of Ethereum 2.0, announcing that its launch date is December 1, 2020.

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The first stage

It will be deployed in December 2020. The goal of the initial phase is to implement the Beacon Chain, introduce a PoS mechanism, and store and manage transactions for validators. It is worth mentioning that the current PoW network will run concurrently with the beacon chain to ensure the continuity of the transition.

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And the first phase of Ethereum 2.0 is scheduled to launch in 2021 and will see the integration of sharding. Initially, the network will launch with 64 shards and will not initially support smart contracts and accounts. Next, there will be a provisional 1.5 phase, when the Ethereum mainnet will become a sharded system and adopt PoS.

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Is Ethereum 2.0 better at scalability?

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What is the impact of the Ethereum 2.0 upgrade?

Even before Serenity launched, the crypto community had reacted. Here's how the web will be affected, and what the impact is today.

The impact of Ethereum 2.0 on ETH price?

The price of Ethereum reacted positively to the upcoming upgrade. Still, the recent rally has been tied to broader market moves driven by the Bitcoin and DeFi boom, largely dependent on Ethereum as the main network for most DeFi projects.

All in all, ETH/USD surged from around $130 at the beginning of the year to over $600 in mid-November. In early September, ETH/BTC peaked at 0.39 due to the Medalla release and other ETH 2.0 news. However, the pair retreated somewhat as Bitcoin strengthened. Naturally, I believe that the future of Ethereum after this upgrade is still on the bright side. Of course, how the crypto market responds is also highly dependent on practical applications.

Security of the Ethereum Network

The upcoming Ethereum 2.0 network has been developed with security in mind, although we have no way of knowing how secure it will be for users. Some experts believe that PoS systems are even more centralized than PoW networks.

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One of the interesting elements of Ethereum 2.0 is the possibility of staking. However, don’t expect to get involved right away, as there is a threshold that requires you to hold no less than 32 ETH to become a validator.

According to the current price, each node costs more than 19,000 US dollars, which is not a small number for ordinary people. However, you can still stake by using the services of a reliable staking pool. As of now, judging by the total number of deposits staked on Ethereum, it shows an upward trend.

What are the risks that Ethereum 2.0 carries?

The testnet experiment had to fix a few bugs here and there, but the Serenity developers were generally happy with the results. Some users are concerned about possible glitches during the Ethereum 2.0 update, such as code bugs or security breaches caused by network splits. However, the developers are sure that such concerns do not exist. Regardless, since the code is new, crooks are looking to exploit bugs on the upcoming upgrade.