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Ethereum, like Bitcoin, currently runs on a consensus protocol called Proof of Work (POW), where all the participating nodes need to agree on the state of the blockchain. This protocol sets the difficulty level for the miners to solve cryptographic puzzles so that new blocks can be added to the network. To make the network more secure, Ethereum has introduced an upgrade, commonly called Ethereum 2.0 or ETH2.0, which is a major upgrade from the current Proof of Work to Proof of Stake (POS). In POS, the nodes stake the cryptocurrency for validating transactions. As cryptocurrencies are already present in the network, there is no need for stakers to solve complex puzzles for adding new blocks. This makes the system faster and more secure.
Need for Upgrade
There are inherent shortcomings in the existing Ethereum network that need to be addressed. This led to the need for a set of upgrades that could make the network more efficient. Letâs see what the pitfalls of Ethereum 1.0 are:
- Considerable Energy Consumption: The POW consensus mechanism requires miners to consume a high amount of power and with the increase in network size, the amount of energy required to block mines has posed a great challenge. The bigger the network, the higher is its electricity demand and this can play havoc on the cost of maintaining the network.
- Slower Transaction Time: As Ethereum adaptability reached globally, the number of transactions shot up and this led to clogged networks as well as higher transaction latency, which ultimately slowed down the transaction times (as a large number of nodes need to agree upon the validity of each transaction).
- Scalability Issues: As the number of nodes increased considerably, it became difficult to maintain the decentralized nature of the network, which is the core of blockchain technology.
- Higher Gas Fee: Ethereum has been famous for its notoriously high gas fee that the users need to pay for transactions done on the network. This thwarts a large number of users and makes them look for alternatives.
About the Upgrade
ETH 2.0 is the major upgrade that will be carried out in different phases, the first phase being launched in 2020 and termed phase 0. Phases 1 and 1.5 have been rolled out in 2021. The final phase is expected to be initiated in 2022. The upgrade will bring about the architectural changes in the network and help smooth the transition from Ethereum 1.0 to 2.0. Initially, the old Ethereum chain would continue as POW; later on, towards the completion of the upgrade, this chain would be merged with the new ETH2.0 chain. It should be noted that this upgrade would not be a forking event (where software rules get changed resulting in an older and newer version of the software running in parallel). ETH2.0 would be a full upgrade of the system and the old chain would be eventually merged with the new one.
Phases of Ethereum 2.0
Phase 0 (Beacon Chain): Implemented in 2020 and currently live, Beacon Chain brought the POS mechanism into action for Ethereum. To be a validator of the POS mechanism, each one of them must stake 32 ETH to get validator software activated and are selected randomly for block creation. Beaconâs supported POS exists along with the original POW network for Ethereum 1.0. Beacon Chain is responsible for maintaining validatorsâ registry details. It manages the implementation of the consensus rules. It not only manages validators and their rewards but is also responsible for creating and validating new blocks.
Phase 1 (Merge): Expected to be completed by 2021, the next phase of Ethereum 2.0 rollout will be the merging of the Ethereum Mainnet with the Beacon Chain. The completion of this merge will bring about a stop to the Ethereum mining network and will mark the beginning of the full-fledged implementation of the staking mechanism.
Phase 2 (Sharding): The word âShardâ stands for a tiny piece or a fragment. Under the Sharding phase (which will be carried out in several sub-phases), the Ethereum network would be split into 64 chains or shards. The current Ethereum network runs on a single chain and makes it essential for all the nodes to verify the data on every block. This makes slows down the speed at which data can be processed and lowers the number of transactions that can happen per second. With sharding in place, the participating nodes would be required to validate only the data they receive. Such a scalability mechanism would increase the number of transactions per second as it will allow the transactions to run in parallel. This will ensure high throughput even at the time of high mainnet activity. During this phase, the contract calls would be implemented. The sharding would increase network security to a large extent. The Sharding phase is expected to be completed by 2022.
Benefits of Ethereum 2.0
Ethereum 2.0 will be an improved version of the legacy chain and would bring about the following value to the network:
- Scalability: Excessive increase in the number of nodes due to an upsurge in demand over the last few years necessitated a network that could handle scalability issues well. ETH2.0 would support an increase in the number of transactions (TPS), thus enhancing network speed at an additional cost of energy consumption. Being able to handle thousands of transactions per second, the network would not only be faster but also scalable.
- Low Carbon Footprint: Ethereum2.0 would virtually end the need for excessive energy consumption with an increase in network. As electricity requirements arising out of the need to mine complex puzzles would no longer be there, the network would bring about energy efficiency, making it a more appealing option for users and reduce the carbon footprint globally. According to a tweet by Vitalik Buterin, âEthereum energy consumption will be diminished by a factor of more than 1000 with the POS modelâ. The old POW would pave the way for a POS consensus mechanism where there would be no requirement of a consensus being reached by all the miners solving a block puzzle. By switching to POS, the energy consumption of Ethereum is expected to get reduced by about 99%.
- More Viability: With the completion of ETH2.0 or âSerenityâ as it is called, the high fee for using the network would be reduced. This would bring about economic viability and instead of looking for alternative network options, users would stick around more.
With the full implementation of Ethereum 2.0, the number of network participants would increase significantly, making the chain more secure and raise its ability to keep its decentralized nature intact. It would be difficult for hackers to secure a large part of the network, thus making it less prone to any malicious attack.
Author Bio:
Technical Writer with experience of writing on SAAS and other cloud technologies. She is always curious to know about the nuances of the blockchain. Loves documentaries and motivational speeches. She likes to spend her free time.
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