The Ethereum blockchain remains the most popular blockchain platform in the world. It handles more transactions than even the Bitcoin blockchain, and it is trendy for its utility with developers and app builders.
However, developmental and operational issues have set the blockchain back for a while now, preventing it from reaching maximum potential and causing the Ethereum blockchain to lose market share over the past few months. To remedy the situation, Ethereum's developers have set out to overhaul the entire network in an upgrade known as Ethereum 2.0. Here, we look at what Ethereum 2.0 is, what it seems to solve, and the progress that has been made.
What is Ethereum 2.0?
Ethereum 2.0 is an upgrade to the currency Ethereum blockchain that looks to improve the network's speed, scalability, and operational efficiency.
With Ethereum becoming more popular in the decentralized finance (DeFi) and non-fungible token (NFT) spaces, the blockchain network must increase its functionality and not get weighed down by increasing user numbers. Ethreum 2.0 looks to improve how the blockchain network will operate and provide more functionality for everyone who will use it in general.
Primarily, Ethereum 2.0 has two fundamental changes to the design and structure of the previous version. These are:
- The proof-of-stake mechanism: Also known as PoS, this consensus mechanism uses validators instead of proof-of-work, which uses miners. Validators are responsible for proposing new blocks, providing computing power, and offering bandwidth to validate transactions. Validators will need to deposit some amounts of ETH into the network, and they will get payouts in exchange for their deposits and the work they do.
- Sharding: This process involves splitting a single blockchain into multiple chains. It improves a network's efficiency and scalability as it spreads the workload between validators. Every validator will have to maintain the information related to their "shard," and validators can be shuffled between shards regularly to avoid manipulation instances.
How Ethereum 2.0 Differs from the Original Ethereum
PoW, PoS, and Energy Efficiency
Primarily, the difference between the original Ethereum blockchain and Ethereum 2.0 lies in the consensus mechanisms they use. Ethereum uses the proof-of-work (PoW) mechanism, while Ethereum 2.0 plans to move the blockchain to PoS.
The reason for this move comes in the drawbacks of PoW. The Bitcoin blockchain uses this same consensus mechanism, and experts agree that it is too energy-intensive. Miners will need to decode complicated mathematical puzzles using computers that provide massive processing power. Whoever solves the puzzle can add a new transaction to the blockchain, and they are eligible to get more tokens.
In PoS, validators use cryptocurrencies to verify transactions. Validators will need to work based on the amount of crypto they hold and the exact time. When a majority of validators claim to have seen a block, it is added to the blockchain. On their own, the validators get rewards for working.
All in all, PoS uses less computing power to secure a blockchain. So, it is markedly more energy-efficient. With more people criticizing cryptocurrencies over their energy consumption, the Ethereum developers hope to bring an era of greater energy efficiency and improve how thor blockchain operates generally.
As explained earlier, Ethereum 2.0 plans to improve scalability through sharding. Essentially, sharding breaks the Ethereum blockchain into different chains (also known as shards). Each shard should be able to support up to 10,000 transactions a second - an improvement over the Ethereum blockchain, which currently supports about 30 transactions a second.
The introduction of shards ensures that the blockchain can work much faster and provide a better use for developers. With the Ethereum blockchain getting more adoption from sub-industries like NFTs and DeFi, increased scalability ensures that users and developers will be able to use the blockchain more.
Scalability issues already cost Ethereum a lot. Network congestion has led to increased transaction fees on the network, and metrics show that the numbers might not be coming down anytime soon. This problem has led to the rise of competing blockchains like Polkadot and Solana, which hope to steal the blockchain market share and get a larger piece of the pie.
With shard chains, the Ethereum blockchain can become much more scalable. Transactions can move much faster, and they don't have to be so expensive.
At the same time, sharding should help improve transaction safety on the Ethereum blockchain. The logic is simple - combining PoS and sharding brings more network validators and greater blockchain numbers. Essentially, this combination will increase scalability and ensure that there is less room for transaction manipulation.
Examining the Roadmap
Etheruem began its journey to this upgrade a few years back. Since then, it has been working systemically to implement the blockchain while maintaining its original platform's constant running.
Phase 0 of the Ethereum 2.0 project launched in December 2020, with the Beacon Chain's launch. The chain will connect all shards of the Ethereum blockchain, and it will store the registry of validators while also deploying PoS.
The next phase should launch this year. It will involve the integration of 64 shards. From there, the current Ethereum chain will become a shard of Ethereum 2.0 in steep 1.5. The same step will include the enabling of transfers and the integration of validators.
In phase 2, shards will be fully operational and allow smart contract compatibility. This phase is expected to launch in 2022. The work appears to be smooth enough, with Ethereum already garnering growing attention from investors.