Last updated on May 18th, 2024 at 11:48 am
The long plan to upgrade to Ethereum 2.0 and move Ethereum from proof-of-work to a proof-of-stake mechanism is almost complete. You must have been hearing about this and may be confused as to what it means.
We have written this article to explain the concept of Ethereum 2.0 and further help with whatever questions you might have concerning it. The goal of this upgrade is to improve the Ethereum network scalability and security. Let’s get to it.
What is Ethereum 2.0?
If you are not already familiar with what Ethereum is, “Ethereum is a blockchain-based digital platform used for smart contract-enabled transactions, including cryptocurrency trading.” Read more about what Ethereum is HERE
Having known this, it will be easy to understand what “2.0” means. Ethereum 2.0 simply put is an upgrade to the Ethereum blockchain. It is also called Eth2 or “Serenity.” This upgrade aims to improve the speed, performance, scalability, and also security of the Ethereum network by shifting the mining model from “Proof-of-Work” to a staking model “Proof-of-Stake”.
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Ethereum 1 or Eth 1 is referred to as the “execution layer,” which operates with smart contracts and network rules. Eth 2 is referred to as the “consensus layer,” which makes sure that the devices that put up with this network act by its rules.
In January 2022, the Ethereum foundation said that it will stop referring to the upgrade as Ethereum 2.0 because it is not actually a launch of a new network, rather it is just to show a rebrand and also the network upgrade.
When is the 2.0 Launching?
The Ethereum 2.0 had been announced to launch in several phases. The first phase known as Beacon Chain went live on December 1, 2020. Native staking on the Ethereum blockchain was introduced with the Beacon Chain. It is a different blockchain from the Ethereum main network.
The second phase of the upgrade called “The Merge” is expected to go live in the second half of 2022 and is expected to join the Beacon Chain with the Ethereum main network.
“Shard Chain” is going to be the last phase and will play a major role in improving the Ethereum network and also increasing the blockchain capacity and is expected to launch in 2023. Shard Chain will spread operations on the blockchain across 64 new chains.
According to the Ethereum Foundation, the full upgrade is to be completed in 2023.
Related: What are Smart Contracts on Blockchain Technology and why are they so Important?
Ethereum 2.0 vs. Ethereum
The major difference between the original Ethereum and the 2.0 upgrade is the working mechanism. Ethereum 1 uses the consensus mechanism known as proof-of-work (PoW) while the 2.0 upgrade will use the proof-of-stake (PoS) mechanism.
Proof-of-Stake vs. Proof-of-Work
Ethereum, like other cryptocurrencies, currently uses the proof-of-work consensus mechanism to validate transactions in a decentralized way. A machine processing power is used by miners to solve a complex mathematical puzzle and also verify new transactions.
As opposed to proof-of-work, the proof-of-stake doesn’t rely on miners, instead, users can stake the native cryptocurrency of a network and then become validators.
Validators are similar to miners as they perform similar operations like verifying transactions and making sure that the network processes authentic transactions. The validators are selected in terms of the number of cryptocurrencies they have staked on a network and how long it has been staked for.
Validators are rewarded for a successful block proposition. The whole process is known as “minting” or “forging.”
Another difference between these two is that the proof-of-stake is more energy efficient than the present proof-of-work. POS breaks down intensive energy computer processing from a consensus algorithm. You wouldn’t need too much computing power to secure the blockchain.
How Will Ethereum 2.0 improve Scalability?
Scalability is one of the things that the new upgrade promises to improve. The present Ethereum 1 network supports about 30 transactions per second and this causes overcrowding of the network.
Meanwhile, the new Ethereum 2.0 upgrade promises to increase transactions to about 100,000 per second. This will improve overall scalability by over 3000 and it will be done by the implementation of the Shard Chain which is the last phase of the upgrade. Remember the Shard Chain will spread operations on the blockchain across 64 new chains.
Will Ethereum 2.0 Increase Ethereum Price?
More transaction per second means more usage which also translates to more demand. This should shoot the price of Ethereum to new heights.
Speaking with Decrypt, the founder of Nifty Orchard, Jamie Anson said;
“By the time ETH 2.0 and rollups work together there will be 100,000 transactions per second capacity. That’ll mean a completely seamless experience for the next billion people.”
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Victor Swaezy
Victor Swaezy is a crypto-journalist with more than 3 years of experience in covering blockchain technology and digital currencies news. Known for his comprehensive reporting, Victor has contributed to leading industry publications such as Coinfomania and Crypto News Guru, providing market participants with the required knowledge to make informed decisions. When he is not working, he loves to watch movies and have a good time.