Pour some cold water on Ethereum

In the past five years, Ethereum has achieved a series of major achievements: hosting tens of thousands of applications (DApps); covering multiple token types, with a total asset value of more than 100 billion US dollars; by the end of 2020, the total transaction volume is expected to be close to 10,000 One hundred million U.S. dollars. Ethereum is a key element in the decentralized finance (DeFi) sector and has also become the blockchain network of choice for most stablecoins.

Despite its notable success, the Ethereum project itself has had its share of problems. The core disadvantage is that the network bandwidth is too low. At present, its bandwidth is only about 14 TPS, which is far from meeting the global expansion needs of decentralized financial infrastructure.

Ethereum 2.0 (ETH 2.0) is a major network upgrade, which aims to enhance the scalability, security and energy efficiency of the network without affecting the decentralization characteristics. According to the developer's vision, the zeroth phase of ETH 2.0 will officially launch a transitional platform for testing the proof-of-stake consensus algorithm.

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Most economic activities and smart contracts will continue to run on the original Ethereum network, which means that ETH 1.0 and ETH 2.0 will advance in parallel. Developers are currently trying to migrate ETH 1.0 loads to ETH 2.0, but it is almost certain that ETH 2.0 loads cannot be migrated back to ETH 1.0.

ETH 2.0 will fundamentally change Ethereum's monetary policy - its annual common rate is expected to be less than 1%. After this transformation, native assets on the Ethereum network are expected to become important and reliable value carriers.

Ethereum co-founder Vitalik Buterin firmly believes that significant improvements in network parameters will happen much sooner than most people think.

He said in a recent Reddit AMA conference, "Combining ETH 1.0 and ETH 2.0, Proof of Stake makes it possible to increase network performance to 100,000 TPS. We expect ETH 2.0 updates to be faster and more orderly than ETH 1.0." "At this meeting, he talked about his expectations and prospects for the development of Ethereum after the two-year transition period of ETH 2.0.

He also recalled that ZK-Rollups technology is already available to users. This technology can provide processing performance up to 4000 TPS, thereby reducing the transaction cost to one percent of the Ethereum main network.

In September of this year, this T2 layer solution was integrated into the stable currency issuer Tether (USDT) to provide compressed ETH transactions, ERC-20 tokens and smart contract support functions. Tether and Bitfinex CTO Paolo Ardoino said at the time, “ZK-Rollups technology is currently the most comprehensive and advantageous scaling solution. It can keep data on the main chain without having to rely on other side chains.”

So how will all this happen? The answer lies in the four phases of Ethereum 2.0.

Phase zero: Beacon chain, designed to check the performance of the proof-of-stake algorithm.

At this stage, the network is mostly in its natural state undergoing routine testing, although real ether will be used. Within the framework of Phase Zero, Proof of Stake will function in the following areas: management of stakeholder sets, stakeholder fund management, random number generators to help select block generators and stake regulators

Stakeholders vote on block size proposals and assign rewards and penalties to stakeholders.

Phase 1: Fragmentation

Phase zero aims to test the basic proof-of-stake infrastructure, while phase one emphasizes testing the underlying sharding model. During this phase, 65 blockchains will be running concurrently - 64 new shards will be added to the existing beacon chain, with two-way interaction between the chains.

Phase 1.5: Merging the Ethereum Work Stake blockchain with the new Proof of Stake blockchain.

This phase will not have any impact on the historical data of the current network; this is because in the new mechanism, the working stake blockchain will be one of the shard chains. Here I would like to remind all mining participants that the future work rights and interests blockchain will no longer support the work rights and interests mechanism.

Phase Two: Implementing the New Operating Model

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Phase zero officially launched

On November 4 this year, the Ethereum Foundation confirmed the launch of the ETH 2.0 savings contract, and designated 12:00 UTC on December 1 this year as the creation time of the initial block.

Until November 24th, users must deposit a total of 524,288 ETH (minimum participation threshold is 32 ETH) into the savings contract. Another condition for launching the zeroth phase of ETH 2.0 is to attract at least 16,384 validators to participate.

Although the deposit process is slow, by the specified date all conditions have been met and even exceeded the necessary thresholds proposed in advance.

A year ago, Hudson Jameson, lead developer at the Ethereum Foundation, recalled that while the launch of phase zero marked the official start of the transition to ETH 2.0, nothing could change overnight. “The ETH 2.0 transition will be a multi-year process, and the first phase of the transition will not have a major impact on the current Ethereum mainnet,” he wrote.

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A range of issues remain unresolved

The change in the proof mechanism means that cryptocurrencies on the proof-of-stake algorithm and its variants will receive passive income. The essence of this process is that the validator keeps the tokens in the wallet in exchange for the right to participate in cryptocurrency mining, and to ensure network security while making profits from it.

In September, cybersecurity expert Chase Wright expressed doubts about whether ETH 2.0 would be able to attract enough proof-of-proof validators after the zero-phase launch.

He put forward his own arguments based on the survey of Prysm and Lighthouse validator customers in the Onyx, Witti, Altona and Medalla test networks, emphasizing that people should pay great attention to the lack of code audit of blockchain projects. For example, he cited a bug in the Medalla test network, which directly caused the verifier to release a new block before the set deadline, and therefore could not receive rewards normally. Wright said that similar issues are likely to arise on the mainnet as well.

Wright then wrote, “Are users willing to spend hundreds of millions of dollars a day and use large amounts of unaudited, unmodified code to handle subsequent forks, simply because they want to push blockchain projects to the commercial stage? I am afraid. Most people wouldn't want to."

He also mentioned that another major bottleneck of ETH 2.0 is the lack of good interaction between different customers. The development team has not been able to solve this problem, but has always focused on how to complete the task on time.

A more credible response to his concerns might be to create a dedicated security team for ETH 2.0 and organize a full audit by least authority and others before Phase Zero launches.

The Ethereum Foundation is currently working on establishing an internal dedicated security team for ETH 2.0.

Another great feature of proof-of-stake networks is that validators are not only rewarded for their contributions, but also severely punished for dishonest or unethical behavior.

In early November, Vitalik Buterin clarified that in the first few months of operation of the ETH 2.0 agreement, the penalty will not exceed a quarter of the equity held by the Medalla test network, and the annual profit ratio of the network equity with the minimum deposit threshold is about 25%. He emphasized that this is all about attracting validators to participate with sufficient revenue.

However, according to one of the versions, ETH 2.0 may also face another problem: after the launch of phase zero, the growing popularity of DeFi may become the biggest obstacle to attracting users to ETH 2.0. In other words, decentralized finance may steal a considerable proportion of liquidity.

Consensys Condefi said in October this year, "Even in the most optimistic case, ETH holders are likely to decide to wait and see the early returns of DeFi. In the worst case, they are likely to refuse to wait until the 1.5 stage." Take your ether for any 'adventure'."

Although the official has always guaranteed that the release of ETH 2.0 will not have any negative impact on the decentralized nature of the network, the recent service interruption of Infura, a core provider of Ethereum network infrastructure solutions, shows that the original ecosystem must undergo a major overhaul .

conclusion

conclusion

According to the developer's plan, the Ethereum network will usher in a real expansion after the transition phases are advanced one by one. The current poor 14 TPS throughput is obviously an imposed limitation, and the potential capacity space of up to 100,000 TPS after the upgrade is expected to help Ethereum realize the ambition set since its birth-to become a "world computer", But there is still a long way to go.