For anyone who has been in the crypto world for a while, it is not big news that Ethereum is running into a number of problems. So it’s high time for a bit of renewal! Ethereum is – next to Bitcoin – one of the oldest cryptocurrencies in existence. Even though that has only been about ten years, Ethereum is definitely one of the loggerhead blockchains out there compared to all fast new crypto.
So it is high time for innovation! Because Ethereum cannot lag behind in terms of development. Ethereum will also have to pull out all the stops to be able to grow with all the technological changes that seem to follow each other at a rapid pace.
When looking at the serious downsides of Ethereum, terms such as ‘durability’, ‘speed’ and (the most important!) ‘scalability’ come up regularly. Since December 1, 2020, Ethereum has embarked on a very important transformation, which should end all these problem areas and ensure that Ethereum has a very bright future.
Because you are of course just as curious as we were, in this article we will take you extensively through the problems of Ethereum 1.0 and the smart solutions that have been devised on the side of Ethereum 2.0 (also called Serenity) to solve all these problems. to face.
Not unimportantly, the price of ETH2.0 has already risen considerably, making it seem as if all devised solutions and measures have a positive effect on the confidence of both traders and enthusiasts when it comes to Ethereum 2.0.
In this article we will therefore fully inform you about what Ethereum 2.0 actually is, what you can expect from it, how the roadmap is designed and what the effect of Ethereum 2.0 is on you. Who knows, this article may help you cross that threshold to become enthusiastic about the new Ethereum, just like many others!
So sit back and relax and we’ll do the rest! On to the future! On to Ethereum 2.0!
Please note: keep in mind that the following explanation about Ethereum 2.0 and the explanation thereof should in no way be taken as advice. The choice for whether and how you want to trade (crypto) and which choices you make in terms of investment is up to you and you alone. We are not financial advisors!
What is Ethereum
Before we dive into the ‘upgrade’ that Ethereum 2.0 is supposed to propose, it is practical if you understand what the starting point – ie the ‘old Ethereum’ actually is for something. That is why we first briefly explain what Ethereum itself actually is.
Ethereum cannot really be compared to Bitcoin . Sure, Ethereum is also a crypto, but in essence, Ethereum is really radically different from Bitcoin. Why is it like that?
Bitcoin actually aims to replace the services of banks or companies such as Paypal. Ethereum is targeting third parties within the internet in an attempt to sideline them. While Bitcoin is mainly focused on financial services, Ethereum focuses on data.
Data is hot in 2021. Just think of the internet, for example. Every day so much data is created about websites, visitors, users, purchases, you name it. This data is always centrally stored somewhere on computers. This is costly, time consuming and above all dangerous! Hackers can take over these computers and data can disappear or data is more vulnerable than people (or you) would like.
Ethereum is one of the newest technologies that should ensure that data can also be stored decentrally. This is more transparent and safer, but at the same time has a number of drawbacks. We mentioned them before. Scalability, speed and durability. The first two in particular are currently a major stumbling block to global adoption of Ethereum.
Transactions on the Ethereum blockchain are expensive, take a relatively long time and are therefore not scalable. The more the Ethereum network is used or deployed, the more expensive the costs become and the longer transactions take. It should be clear by now that this is not a very relaxed starting point for further growth.
And what do you do as Ethereum when you run into some problems? Exactly: you are going to solve these problems. And how do you solve those problems? Right, with Ethereum 2.0!
What is Ethereum 2.0
Now that you understand a little bit of what Ethereum does and is, it’s time to get back to today’s main topic: Ethereum 2.0. Let us make it clear beforehand that Ethereum 2.0 is not a ‘different’ crypto than Ethereum 2.0. So the ‘old’ Ethereum just becomes the ‘new’ Ethereum, without you having to do anything for it.
So Ethereum 1.0 will simply become Ethereum 2.0, so you can see it as an upgrade, nothing more, nothing less. Yet it immediately sounds less exciting than it actually is, because Ethereum 2.0 is huge !
With its upgrade, Ethereum 2.0 ensures that the Ethereum blockchain not only becomes more sustainable, but that it can also work a lot faster, making the entire concept of Ethereum more scalable.
To make that possible, Ethereum 2.0 works with a number of new technologies, some of which we already know from other modern crypto projects. The new technologies that ETH 2.0 will use are:
- Beacon Chain
We also know sharding from other crypto projects such as Radix DLT (eRDX) or Zilliqua ( ZIL ) and staking is seen as an equivalent of mining, which we also do with more and more projects that function via the ProofOfStake (POS) concept. We will explain these concepts to you in a calm manner!
We just mentioned the Proof of Stake concept. Bitcoin, but also Ethereum 1.0 use the Proof-of-Work concept. So-called ‘miners’ receive a fee for discovering and validating blocks on the blockchain. There are just some caveats to the whole mining concept.
Mining is a bit bad for the environment. Well, that is already the case with the mining of commodities, but mining Bitcoin or Ethereum 1.0 is not much better for the environment. A lot of electricity is lost in this process.
In 2018, the world used as much electricity to mine crypto as all of Ireland did. So it remains to be seen how long the Proof-of-Work concept will continue to exist. Proof of Stake is therefore the slightly more sustainable variant of mining and this is the concept on which Ethereum 2.0 is built.
Ethereum 2.0 thus ensures that Ethereum undergoes a step-by-step transition from Proof of Work to Proof of Stake. Ethereum is expected to run entirely on PoS in the future. This also means that you can suddenly stop Ethereum from December 1, 2020, which could be an interesting solution for many investors.
There is only one downside to discontinuing Ethereum. Firstly, as always with staking, your crypto is fixed and you cannot access or do anything with it in the meantime. Another disadvantage may be that the threshold to withdraw ETH is set at 32 ETH. That is now a sloppy 35,000 euros.
Do you not have 35,000 euros or would you rather not put that kind of money into staking Ethereum? Then you can also use a staking pool. You then invest a smaller amount of ETH together with other investors in order to reach the threshold of 32 ETH. You will then receive a strike compensation pro rata. Binance provides a solution for this.
Staking is fun of course, but what’s going to be the main difference for Ethereum is implementing Sharding in the current Ethereum setup. Sharding will make Ethereum insanely faster than the original model.
Ethereum 1.0 can handle about 30 transactions per second. That may sound like a lot, but if you look at a somewhat average bank, they are at thousands of transactions per second. So there is a big difference between them.
Sharding will ensure that Ethereum 2.0 can scale up to no less than 100,000 transactions per second, that’s a different story! Sharding is a fairly complex story, but we’re going to try to explain it anyway!
With Ethereum 1.0, a transaction is controlled by nodes. Imagine for a moment that there are a total of 1,000 nodes on the Ethereum blockchain that obediently check the transactions. Every transaction is properly validated by all 1,000 nodes before it is pushed through.
With sharding, transactions are ‘distributed’ over available nodes. Suppose that 8 transactions are offered at the same time, then sharding does not choose to place all 8 transactions in a queue and settle them one by one via all 1,000 nodes, but sharding chooses to assign each transaction to 125 nodes. so that they can be performed simultaneously.
This is of course a bit of a simplified picture of what sharding is. In reality it is a bit more complex and obviously involves a lot more nodes and transactions, but hopefully you now understand what sharding is, how it works and why it is so important to improve the scalability of Ethereum through sharding.
Perhaps less well known than the terms sharding and staking is the term Beacon chain. Beacon chain is the backbone of the new Ethereum! Beacon chain is the icing on the whipped cream or sauce that manages to bind the entire dish of Ethereum 2.0 together.
Beacon chain coordinates the Ethereum blockchain network in such a way that the shard chains (of sharding) and the strikers work together in such a way as to ensure a blockchain that is both scalable and secure that does not compromise on matters such as security and privacy.
You can also see the Beacon chain as a completely new Proof of Stake blockchain. This makes it possible to discontinue Ethereum instead of mining. As a result, Beacon chain will ensure that Ethereum will be fully under PoS in the future. In addition, Beacon chain ensures that they will select the right shards for validation.
The implementation of Ethereum 2.0
It takes a while to turn a process that has been going on for years 180 degrees. It is therefore a bit ambitious (or naive) to think that this will be arranged within a few days. It therefore takes about three years for the entire transition from Ethereum 1.0 to Ethereum 2.0.
The entire transition will be divided into three phases: phase 0, phase 1 and phase 2.
You would expect to start with phase 1, but no, Ethereum starts with phase 0. Strange, but hey, it will be all right. Phase 0 is therefore the first (or zeroth) phase of the transition from Ethereum 1.0 to Ethereum 2.0!
In this phase the introduction of the discussed Beacon chain takes place. The sharding concept is not yet live at this stage, but the network will already start accepting strikers via a smart contract.
In order to start phase 0, a total of 524,288 ETH was needed. So we had to wait a while for this number, but this was reached on November 23, 2020. A week later, phase 0 finally started, on December 1, 2020. A legendary date for everyone who is a fan of Ethereum.
In phase 1 the introduction of the shard chains (ie the sharding part) takes place. It allows strikers to create blocks on the blockchain themselves and validate transactions. Later, these shard chains will officially be adopted into the Ethereum mainnet and then the party can really start. And in this case, by the party we mean the final transition from Proof of Work to Proof of Stake! Long live Ethereum!
In the final phase, Ethereum 2.0 will be the new and only Ethereum network that remains. In phase 2 sharding will be fully supported and will be linked to smart contracts . This is also the moment when administrators and developers of dApps can finally switch to Ethereum 2.0.
It might take another 3 years for the entire transition from Ethereum 1.0 to Ethereum 2.0 to be completed, but the end result is definitely worth the wait! We started on December 1, 2020, but now we can already look forward to all the beauty that Ethereum 2.0 will bring us.
The good news is that you don’t have to exchange your existing Ethereum tokens or fear a hard fork . Your current Ethereum will soon become Ethereum 2.0 automatically, without you having to do anything with it.
On the Ethereum launchpad site you can find everything you want or need to know about the transition to Ethereum 2.0. Whether the price increase of Ethereum also has a direct correlation with the start of phase 0 is of course difficult to prove, but the fact remains that with the arrival of Ethereum 2.0 there suddenly appears to be a future for Ethereum itself.
In addition to Ethereum, the many ERC20 tokens, such as Radix DLT or Glitch, also benefit. For crypto in general, this is a huge step towards further adoption within society. It shows once again that the crypto industry is still in full development and every day we are working more and more towards a sustainable future with crypto in this world.
Want to know everything about Ethereum 2.0? Then watch this comprehensive video from the creator of Ethereum, the world famous Vitalik Buterin!
Thanh Lanh Tran(1989) is Chief Editor from BitcoinUSD.com