Ethereum 2.0

Ethereum 2.0 will be a restructuring of the world’s largest smart contracts platform Ethereum. Many changes will be made, and some of them may help you monetize Ethereum that is lying idle.

What are the positives and negatives of Ethereum 2.0? What are the changes? What about the roadmap? Let’s talk about all this and clarify the main doubts.

Ethereum 2.0 is the next major update to the protocol, which is being developed to improve network usage, bringing more scalability and ease of development.

What are the differences between Ethereum and Ethereum 2.0

The differences between Ethereum and Ethereum 2.0 are many, let’s highlight the main ones:

  • Changing the consensus algorithm;
  • Network structure remodeling;
  • Monetary policy modification.

We will cover each of them in detail, so follow us to the end to dispel all your doubts.

Changes in network consensus:

The first and biggest change users will see will be in the way blocks on the Ethereum blockchain are validated.

Currently, Ethereum blocks are mined using the Proof-of-Work (PoW) method, which means that blocks require a lot of processing power to be included in the network. Once the Ethereum 2.0 update is complete, this will change and blocks will be Proof-of-Quality (PoS) validated, requiring only an amount of 32 ETH and the technical skills to build a server to help the network.

Network remodeling

Instead of the idea of being a single decentralized computer for the entire world, Ethereum will have a structure of multiple “minicomputers” connected to the main network. The network will be split into shards.

But what is sharding?

The term comes from computer science and refers to the partitioning of a database into multiple machines. When it comes to blockchain, in simple terms, sharding means dividing a cryptocurrency network into multiple interconnected blockchains.

Changes in monetary policy:

Ethereum’s monetary policy will also change completely. In the early stages of Ethereum 2.0, we will have two separate networks generating rewards for both those who mine via Proof of Work and those who validate blocks via Proof of Quantity.

This means that we will have the same 2 Ethers per block when mining, added to the variable amount of Ethers generated per circuit when PoS. This will happen until regular Ethereum is integrated into Ethereum 2.0 (see below about upgrade stages).

The following table shows the amount of Ether that will be created on the PoS chain. The amounts are determined according to the number of validators, the idea being that users will have enough incentives to switch.

eth 2.0

What is the difference between PoS and PoW?

In every blockchain, transactions must be verified in a decentralized manner. Ethereum, like other cryptocurrencies such as bitcoin , uses the Proof-of-Work (PoW) consensus mechanism. In this system, miners use the processing power of a machine to solve complex mathematical puzzles and verify new transactions.

The first miner to solve the puzzle adds a new transaction to the list of all the transactions that make up the blockchain. They are then rewarded with the network’s own cryptocurrency.

In Proof-of-Stake (PoS), instead of miners, users can host the network’s native cryptocurrency to become validators. Validators are similar to miners in that they have the same responsibility to validate transactions and ensure that the network does not process fraudulent transactions. The choice of who can validate a block on the Ethereum network depends on how much ether the user has put in and how long those assets have been allocated.

Other validators can then validate that they have seen the blockchain. When there are enough validations, the block can be added to the blockchain. Other validators can then validate that they have seen the block.

Validators are then rewarded for successfully offering blocks. The biggest advantage of PoS is that it is a more stable consensus than PoW because it eliminates all the energy-intensive computational processing. It also means that you do not need to have very powerful machines to secure the blockchain.

When will Ethereum 2.0 be released? About the ethereum roadmap

Since the launch of Ethereum in 2015, there has already been discussion about a protocol update that could increase transaction throughput on the network. Frontie, Homestead and Metropolis were the first ETH epochs and updates, now we are entering Serenity with Ethereum 2.0. Serenity will be divided into sub-upgrades, which we will detail in the following topics.

Calm Phase 0: Arrival of validators

It will implement a “Beacon Chain” that will have a Proof of Stake and allow for ether transactions from the old chain to the new chain.

Initially, Ethereum 2.0 will be released without the ability to send transactions, create smart contracts, or even store user data. It will just be a test chain to validate and coordinate validators.

Transactions will continue as usual on “Ethereum 1.0”, and once the ether is transferred to the beacon chain, it will not be allowed to be sent back to Ethereum.

Phase 1: Expected sharding

As long as the beacon chain works perfectly, we will be able to run the main scaling feature – sharding.

Each of these blockchains will be a shard, initially 64, with the possibility of expansion in the future. The beacon chain will serve as a bridge between the shards. At this stage, users will only be able to make ether transactions without smart contacts.

Phases 1.5 and 2: Return of decentralized applications (Dapps)

In Phase 1.5 we will have Ethereum integration with Ethereum 2.0, it will be one of 64 shards. It will be in Phase 1.5 that Proof of Work will be announced, and the generated Ethereum chart will look like this:

Already in the second phase we will get the ability to introduce Dapps for all shards, which means that smart contracts will be enabled again.

etherum 2.0

New programming languages other than Solidity will be added for Dapps development.

Phase 3: The finishing touches

This is the least defined phase of the new Ethereum. According to Vitalik Buterin, co-founder of Ethereum, this will be the time to add new features such as more shards, ZK-stacks (to improve network privacy) and other technologies that are still under development.

How will ETH 2.0 be more secure?

Link to Vitaly’s post

Ethereum 2.0 was created with security in mind . Most networks have a small set of validators, which ultimately creates a more centralized and less secure system.

ETH 2.0 requires a minimum of 16,384 validators, making it much more decentralized and therefore secure. However, according to Lyor Jaffe , co-founder of Jelurida and lead blockchain developer Ardor and Nxt , there is a potential vulnerability that focuses on the participation level of the network.

Security audits of Ethereum 2.0 software code are conducted by organizations including specialized companies Least Authority and Quantstamp. The Ethereum Foundation is also building its own security team for the new version of the coin to identify potential cybersecurity issues.

Justin Drake, Ethereum 2.0 researcher, said the research will include “phasing” (software testing method), “bug hunting”, “pager duty” (support), crypto-economy modeling, applied cryptanalysis and formal verification.”

How long until Ethereum 2.0 development is complete?

According to Buterin, the development of this roadmap may take 5-10 years. Each phase is expected to last 6 to 8 months, but in recent years the cryptocurrency development team has gained notoriety for delaying deadlines.

Where to buy Ethereum 2.0?

The idea of having two separate networks with different tokens could cause the price of Ethereum locked in Ethereum 2.0 to be different from Ethereum in the PoW chain. Therefore, we can even expect to see markets trading Ethereum securities on the 2.0 chain for Ethereum on the main chain.

Now if you want to migrate the validator to Ethereum 2.0, you will need 32 Ether locked in the new chain.

The future of Ethereum

Despite the progress made, it is important to note that many points of the update are still unresolved. For example, we do not know how data transfers between shards will occur and how Ethereum 1.0 will be incorporated into Ethereum 2.0.

It will be a long and risky journey, the first time a project of this scale will take such a radical change of structure in the cryptocurrency space. The risk of something going wrong is huge, just as the rewards should be big if everything goes well.

But remember, “Never invest more than you can afford to lose,” and keep in mind that Ethereum 2.0 is a huge experiment involving new technologies, dozens of developers and companies.

How will ETH 2.0 affect the price of ether?

For some people, the launch of Ethereum 2.0 was exactly what the cryptocurrency needed. “Once Ethereum becomes scalable with Layer 2 technology or ETH 2.0, all questions will be answered,” Jamie Anson, founder of Nifty Orchard and organizer of the Ethereum event in London, told Decrypt.

In other words, more scalability generates more usage, which in turn generates more demand. In theory, this feature could raise Ethereum’s price to new highs.

“By the time ETH 2.0 and ‘convolution’ work together, the throughput will be 100,000 transactions per second. That means the next billion people will have a fully integrated experience,” he added.

Matt Cutler, CEO of Blocknative, a meme complexity company, is also very optimistic, mainly because of the expectation that gas rates will come down with the launch of Ethereum 2.0. “Our customer base sees lower transaction fees and increased network bandwidth as major future opportunities,” he explained. In addition, the entire ecosystem is aware that major advances such as the emergence of Ethereum 2.0 will strengthen the momentum of Ethereum developers.

“This will have a positive long-term impact on the price of ETH – despite the short-term volatility that is an inherent part of cryptocurrencies,” Cutler concluded.

FAQ

What is Ethereum 2.0?

Ethereum 2.0, also known as Serenity, is a major upgrade to the Ethereum network that aims to improve its scalability, security, and sustainability. The upgrade includes several changes to the network, such as the introduction of a new proof-of-stake consensus mechanism and the creation of shard chains to increase its capacity.

What are the benefits of Ethereum 2.0?

Ethereum 2.0 is expected to bring several benefits to the network, including increased scalability, allowing more transactions to be processed per second, increased security, making the network more resistant to certain types of attacks, and increased sustainability, reducing the energy consumption of the network.

When will Ethereum 2.0 be launched?

Ethereum 2.0 has been rolled out in multiple phases starting from Dec 2020, each phase introducing new features and changes to the network.

Will my current Ethereum still be valid in Ethereum 2.0?

Yes, your current Ethereum (ETH) will still be valid in Ethereum 2.0 and can be used to participate in the new proof-of-stake consensus mechanism, or can be exchanged for the new Ethereum tokens.

How can I participate in Ethereum 2.0?

To participate in Ethereum 2.0, users will have to deposit a certain amount of ETH into a special smart contract to become a validator. The process is also called Staking. It requires a certain amount of Ethereum and a validator client software.

Will Ethereum 2.0 be compatible with current Ethereum apps and smart contracts?

Ethereum 2.0 is designed to be backwards-compatible with current Ethereum apps and smart contracts, although some changes may be required for them to fully take advantage of the new features.

Is there any risk involved with participating in Ethereum 2.0?

As with any new technology, there is a level of risk involved with participating in Ethereum 2.0. It’s important to do your own research and understand the potential risks before deciding to become a validator or invest in Ethereum.

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