It’s been a long time, but the first phase of Ethereum 2.0 is finally up and running. The multiphase upgrade of the popular cryptocurrency aims to address the scalability and security of the Ethereum network through several changes to the network infrastructure, most notably the shift from a Proof of Work (PoW) consensus mechanism to a proof of stake model ( PoS).
Ethereum 2.0, also known as Eth2 or “Serenity”, is an upgrade of the Ethereum blockchain. The update aims to improve the speed, efficiency and scalability of the Ethereum network so that it can process more transactions and alleviate bottlenecks. Ethereum 2.0 launches in stages, with the first update, called Beacon Chain, which went online on December 1, 2020. The Beacon Chain introduces native staking into the Ethereum blockchain, a key feature of the network’s transition to a PoS consent. As the name suggests, it is a separate blockchain from the Ethereum mainnet.
The second phase, called The Merge, is expected in the first or second quarter of 2022 and will merge the Beacon Chain with the Ethereum mainnet. The final stage is Shard Chains and will play a key role in scaling the Ethereum network. Instead of arranging all operations on a single blockchain, fragment chains spread these operations across 64 new chains. This also means that it is much easier from a hardware perspective to run an Ethereum node because there is far less data that needs to be stored on a machine.
While Ethereum 1.0 uses a consensus mechanism known as proof-of-work (PoW), Ethereum 2.0 will use a proof-of-stake (PoS) mechanism. In the first type of system, miners use the processing power of a machine to solve complex mathematical puzzles and verify new transactions. The first miner to solve a puzzle adds a new transaction to the record of all transactions that make up the blockchain and is rewarded with the network’s native cryptocurrency. However, this process can be extremely energy-intensive.
Proof of the bet differs in that instead of miners, users can aim for a network’s native cryptocurrency and become validators. Validators are similar to miners in that they verify transactions and ensure that the network is not processing fraudulent transactions. These validators are selected to propose a block based on the amount of cryptocurrency they have staked and for how long they have staked it. Other validators can then attest to having seen a block. When there are enough claims, a block can be added to the blockchain. The validators are then rewarded for the successful block proposal. This process is known as “minting”.
The main advantage of PoS is that it is much more energy efficient than PoW, as it decouples the energy-intensive computer processing from the consensus algorithm. It also means that you don’t need a lot of computing power to secure the blockchain.
Furthermore, one of the main reasons for upgrading to Ethereum 2.0 is scalability. With Ethereum 1.0, the network can only support around 30 transactions per second; this causes delays and congestion. Ethereum 2.0 promises up to 100,000 transactions per second. This increase will be achieved through the implementation of fragment chains.
Ethereum 2.0 was ultimately designed with security in mind. Most PoS networks have a small set of validators, which makes the system more centralized and less secure than the network. Ethereum 2.0 requires a minimum of 16,384 validators, making it much more decentralized and, therefore, secure. The Ethereum Foundation is also establishing a dedicated security team for Ethereum 2.0 to research possible cybersecurity issues in the cryptocurrency.