What is Ethereum 2.0?
If you're unfamiliar with the terminology, ETH 2.0 refers to the next version of Ethereum. It replaces Proof of Work with Proof of Stake, a new system that relies on virtual miners to verify transactions. This new system has many benefits, including increased security and scalability. It's also more energy efficient. Read on to learn more about this new version of Ethereum. But before we get started, let's cover the basics.
Proof of stake
With the introduction of Ethereum 2.0, the Proof of Stake consensus has been added to the system. Previously, Ethereum used the Proof of Work consensus, which requires miners to physically exert computing power to process blocks on the blockchain. In contrast, Proof of Stake does not require miners and does not rely on electricity. To learn more about Ethereum 2.0's Proof of Stake consensus, keep reading. The next section of this article covers the technical details of this system.
Proof of Stake has many benefits, and has been designed to help ETH achieve its goal of becoming the world's most scalable decentralized programmable blockchain. This means that ETH will become more competitive in terms of building decentralized applications. Further, Proof of Stake requires far less computing power, which should make it an ideal option for users who are concerned about security. Proof of Stake also reduces the technical barriers to stake in the Ethereum 2.0 network.
Unlike PoW, Proof of Stake prevents the 51% attack, which involves a single bad actor acquiring control of at least 51% of the network and validating transactions with ill-intentions. To perform a 51% attack, a single bad actor must hold 51% of all tokens on the network, which means he or she could steal from hundreds of Ethereum wallets at once. This attack is highly unlikely to happen on Proof of Stake.
Ethereum sharding is an important part of Ethereum 2.0, a protocol that is meant to divide the blockchain state into multiple independent shards. Ethereum 2.0 will create two levels of interaction between shards. First, a transaction group is created in each shard. This transaction group will be unique to every shard and contains a header that consists of a left and right part. The right part is called the transaction group root and serves as a single point of contact between accounts in different shards. The left part of the header will contain the transaction group's pre and post-states, while the right part of the header will be used to indicate a receipt of the transaction group's entry.
The second type of communication involved in sharding involves an encryption protocol. This protocol prevents the blockchain from becoming a single silo, and will allow shards to communicate with each other without interfering with one another. During transactions, every signature in a transaction group must be verified and processed, which will improve the speed and security of the blockchain. In addition, communication between shards will become more efficient.
In 2021, the Ethereum blockchain will be split into 64 separate shard chains. Each shard chain will be able to process 64 blocks at once. This will help reduce bloat on the main chain. In the meantime, the beacon chain will integrate with the main proof-of-work chain to form a new POS chain and become part of the 64 shard chains. In addition, complex smart contract functionality will be available to developers.
Phase 1 merge
As we've written before, Ethereum will soon be undergoing a major transition. It is undergoing what's known as a Phase 1 merge - the merging of the Ethereum network with the Beacon Chain. This phase is the last public testnet before the network transitions to proof-of-stake. While the Beacon Chain is already running on a separate network, it is expected to merge with the main Ethereum network sometime in late 2021 or early 2022.
During this phase, Ethereum holders will not have to do anything. EF will not support the withdrawal of staked ETH. This merge will make sharding easier and enable Ethereum to scale. In the third phase, the sharding will be implemented, which will make the network more scalable. As a result, the price of ETH will likely increase - but it will become more accessible to the average user.
After this first merge, Ethereum will move from proof-of-work to proof-of-stake. While bitcoin still uses proof-of-work, proof-of-stake requires validators to stake cryptocurrency instead of computing proofs. As a result, the system is said to be more secure, energy-efficient, and decentralized. While the transition from proof-of-work to proof-of-stake is difficult, ethereum's new system is expected to solve this issue.
Phase 2 shard chains
In Ethereum 2.0, phase 2 will introduce execution environments (EEs) that will be able to create UTXO-style and fee-market relayers. Every shard has access to all EEs and can execute smart contracts. This concept is still under heavy research. When it is finalized, Eth 2.0 will endow eWASM as EVM 2.0. However, it's unclear whether the concept will be implemented in the initial version of the blockchain.
The initial component of Ethereum 2.0 is the Beacon Chain, which is the foundation for the entire system. This will allow users to transfer their ETH2 into the shards once Phase 2 is complete. To bootstrap the beacon chain, a minimum amount of ETH will need to be staked. This minimum amount is defined as CHAIN_START_FULL_DEPOSIT_THRESHOLD. The amount staked is a total of 524,288 ETH, with 16384 validators. This amount is then paid as 11% interest to the stakers.
In the initial Ethereum 2.0 phase, a single chain will contain the full history of the Ethereum network. The system will also transition from proof-of-work to proof-of-stake, with shard chains running Ethereum's data. In the second phase, shard chains will be able to process transactions and execute smart contracts, allowing dapp developers to deploy their applications on shards for further scaling.
As Ethereum's popularity continues to increase, its developers have begun working to increase the network speed of the cryptocurrency. While the current network can handle 15 to 45 transactions per second, it can no longer meet the demands of all users around the world. This high demand is driving transaction fees sky high. With Ethereum 2.0, however, the network will be able to process up to 100,000 transactions per second. Hopefully, this new upgrade will increase the speed of transactions for both users and cryptocurrency enthusiasts.
While there are still some problems with Ethereum, the main issue is its transaction capacity. The network currently can only handle 30 transactions per second, which is not enough to handle a billion transactions. Ethereum 2.0 is expected to be able to process more than 100,000 transactions per second. With the increased transaction capacity, gas fees are also expected to fall. As Ethereum 2.0 scales, the network's transaction speed will also improve, lowering gas costs.
The next step in the evolution of Ethereum is a switch to a Proof of Stake consensus mechanism. This is a major upgrade for the network, and it will help the blockchain be more secure, scalable, and sustainable. The switch from Proof of Work to Proof of Stake will reduce the energy consumption of the blockchain by 99%, while increasing the speed of transactions. This is an important aspect to consider as Ethereum 2.0 evolves.
Much lower gas fees
Ethereum has already upgraded its beacon chain last month, but the upcoming upgrade promises significantly higher speeds and much lower gas fees. The new network is also expected to have a much lower carbon footprint thanks to the use of staking. With this upgrade, the Ethereum network will transition to a proof-of-stake consensus mechanism. While this change is expected to have a profound impact on the speed of transactions, the overall network load may have decreased slightly. Regardless of the reasons behind the new network upgrade, there is still much to look forward to in Ethereum.
While Ethereum 2.0 was expected to lower gas costs, its release is still a few years away. While it was supposed to come out this year, it may not happen until 2021. This change will allow for scaling, bundling transactions, and lower gas fees. Regardless of the release date, the benefits will be significant. The benefits will be enormous and make Ethereum 2.0 an ideal project for developers and enthusiasts alike. It is worth the wait.
With the new proof-of-stake algorithm, the Ethereum network will choose people who have staked a certain amount of money. As a result, Ethereum will use 99% less energy and decrease gas fees. The new system is being implemented in phases. According to Vitalik Buterin, the switch to Proof-of-Stake will begin in 2022. If everything goes according to plan, Ethereum 2.0 is expected to have much lower gas fees than the current system.