Since its announcement in 2019, the crypto community has been waiting patiently for the final launch of the new Ethereum upgrade – Ethereum 2.0. Although Ethereum is presently the second-largest cryptocurrency with a market cap of more than $44 billion, the new upgrade promises to make the Ethereum network even more secured, scalable, and sustainable.
That means with the new upgrade, Ethereum might be flipping Bitcoin soon to become the largest cryptocurrency that is. But is the new upgrade worth the wait? Why so much buzz around it?
In this post, we will be talking about important things you need to know about the Ethereum 2.0 upgrade. You will get to know what it entails when it’s going to happen, and what benefits it holds for the crypto community.
Ethereum 2.0; What Exactly Does It Mean?
Ethereum 2.0, which is also called Eth2 or “Serenity”, is a set of interconnected upgrades designed to enhance the speed, efficiency, and scalability of the Ethereum network. The upgrade will promote faster transactions on the network while also easing various bottlenecks.
Although the upgrade has been in the pipeline since 2014, it wasn’t launched until December 2020. The upgrade will happen in three major phases, with each phase geared towards improving functionality and performance on the Ethereum network in different ways.
What is Ethereum 2.0 Release Date?
Although the first phase of the launch happened in December 2020, the remaining two phases may not come into a full release until 2022. The full launch of Eth2 has suffered some delays in the past few months, and this has caused a shift in the launch date earlier slated in 2019. But according to the statement released by the Ethereum founder, Vitalik Buterin, Eth2 researchers are working on ways to accelerate the merge and make the full launch happen earlier than expected.
The Upgrade Will Happen In Three Phases
The new Ethereum is planned to happen in three major phases; Phase 0, Phase 1, and Phase 2. The first phase, Phase 0, was launched in 2020, featuring the implementation of “Beacon Chain.” This stores and manages the registry of validators. It also welcomed the implementation of the PoS consensus mechanism.
Phase 1 will commence in 2021 and will feature the integration of Shard Chains. This will improve transaction time on the network as Shard Chains will allow more than 100,000 to run per second on the Ethereum network compared to the present 30 transactions per second experienced on Ethereum 1.0.
Phase 2 is the third and last phase of the Ethereum 2.0 upgrade, and it’s going to launch anywhere in 2022. Although the things to expect in this phase are not clear yet, users are likely going to be experiencing the addition of ether accounts and enabling withdrawals and transfers. The PoW consensus will also be finally turned off at this phase.
Ethereum Will Be Switching from PoW to PoS
The transitioning from the Proof-of-Work (PoW) algorithm to Proof-of-Stake (PoS) is one of the major features of the new Ethereum upgrade. Like other cryptocurrencies, Ethereum currently uses the Proof of Work consensus mechanism.
With that, miners are required to use computer hardware processing power to solve complex puzzles and verify new transactions. These miners are hence rewarded with ETH for their hard work. However, this process requires a lot of energy.
On the other hand, PoS doesn’t require miners to verify a transaction; it is done by validators who stake crypto for the right to do the job. These validators are chosen based on the amount of crypto they have and for how long they’ve held it. The validators are afterward rewarded for helping to validate a block and add it to the blockchain.
The major advantage of PoS over PoW is that it is far more energy-efficient and doesn’t need a lot of computing power to secure the blockchain.
How Does Ethereum’s Proof-of-Stake Work?
Unlike PoW, validators are selected at random, thereby eradicating any form of competition between validators. No significant amounts of computational power are required, and they also don’t need to mine blocks. All that validators do is create blocks when chosen and validate proposed blocks when they are not.
When we talk about validating blocks, it simply means agreeing or attesting that a block is good and not malicious. In return, validators get rewards for either creating new blocks or attesting proposed blocks. But can also lose their stake if they attest to bad blocks.
What’s New about Ethereum 2.0?
#1: PoS will be replacing PoW
This is the major feature to expect in the new upgrade. Instead of relying on physical miners and electricity as PoW does, PoS uses validators who deposit a certain amount of Ether to participate in building blocks on the Etherum blockchain. That comes with improved scalability, security, and energy efficiency.
#2: Shard Chains
These are scalability mechanisms employed by the Ethereum blockchain to improve the throughput of the network. The Shard chain built into Ethereum 2.0 makes it easier to divide data among many nodes in order to have faster transactions on the blockchain. That means with Ethereum 2.0, transactions are processed in parallel rather than consecutively, resulting in higher throughput. Shard Chains are expected to be part of Phase 1 of Ethereum 2.0.
#3: Improved decentralization of the virtual network
Equipment used for mining is becoming increasingly expensive by the day. Only specialized companies can afford them. This makes the mining market full of certain companies, worsening the decentralization of the network. But with Ethereum’s transition to PoS in Ethereum 2.0, these risks are leveled off.
#4: Energy slash
Ethereum mining consumes a lot of energy. It was estimated that the energy need for Ethereum mining is about 4.2 TWh. That is enough electricity for the whole of Cyprus. But since PoW will be completely replaced by PoS in Ethereum 2.0, there will be a decrease in the amount of energy consumed, making it less energy-intensive and more environmentally friendly.
#5: Improved security
With the PoS mechanism, the chances of an attack on the network are reduced. Before an attacker can make an advancement, he will need a large portion of the virtual network to gain control over the network. That means he will need a whole lot of money to make that happen – more than what can likely be available to a network member
#6: Reduced transaction fees
Transaction fees on PoS networks are much lower, making it possible for users to conduct fast and quality transactions on the network at a lower cost.
Is Ethereum 2.0 A New Coin?
This is one of the concerns of many Ethereum holders about the Ethereum 2.0 upgrade, especially among the new ones. But the fact is that Ethereum 2.0 is not a new coin, and will not change the amount of ETH you hold. On the other hand, the upgrade will lead to improved transactions on the Ethereum blockchain.
