Ethereum 2.0 has been a name associated with “The new Ethereum” as the network undergoes significant changes in its operation. Besides its change in operation, Ethereum 1.0 and Ethereum 2.0 terminologies have also been changed.
What is Ethereum 2.0?
Ethereum 2.0 is simply an upgrade on the Ethereum network that is supposed to make the network faster, cheaper to use, and more scalable. In this upgraded Ethereum, the network participants stake ETH tokens as a contribution to securing the network. In exchange for staking, the network participants receive rewards on their staked ETH. These staked ETH cannot be un-staked until Ethereum 2.0 fully launches, experts predict the full launching to take place before the end of 2024.
The most notable upgrade in Ethereum 2.0 is the switch from a proof-of-work(PoW) consensus mechanism to a proof-of-stake(PoS) consensus mechanism, hereby enhancing the speed, efficiency, and scalability of the Ethereum network.
Ethereum 2.0 Does Not Exist
This statement has often caused some controversy among newbies.
In January 2022, the Ethereum Foundation said it will no longer refer to the upgrade as Ethereum 2.0, this decision is made to reflect the fact that Ethereum 2.0 is a network upgrade rather than an entirely new network. Eth1 is to be known as the “Execution layer,” where smart contracts and network rules reside, while Eth2(Ethereum 2.0) is referred to as the “Consensus Layer“. The consensus layer will replace the current mining system and will also ensure that computers associated with the network are operating in accordance with the laid down rules. In this layer, devices that act maliciously will be penalized and those who act in accordance with the rules will be rewarded.
These two layers will merge to become the upgraded version of Ethereum. However, the name Ethereum 2.0 has stuck and it will take a while to get rid of it.
How Will The Upgrade Happen?
The first stage of the upgrade is called “Beacon Chain,” and it went live on December 1, 2020.
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 phase is shard chains, which will play an important part in scaling the Ethereum network. Instead of settling all operations on one single blockchain, shard chains spread these operations across 64 new chains, thereby increasing the speed of transaction, decongesting the network, and hopefully, reducing the transaction fee on the network.
How does Ethereum 2.0 differ from Ethereum?
Blockchains such as Ethereum need to validate transactions in a decentralized way. Ethereum, like other cryptocurrencies such as Bitcoin, currently uses a proof-of-work consensus mechanism. Ethereum’s upgraded version(Consensus Layer) will use the proof-of-stake mechanism. The change will get rid of a lot of limitations brought about by the proof-of-work mechanism, including the negative impact on the environment.
The current Ethereum network can only support around 30 transactions per second; this causes delays and congestion in the network. The Consensus Layer promises 100,000 transactions per second. This increase will be achieved by the implementation of shard chains. The current Ethereum setup has a blockchain consisting of a single chain with consecutive blocks. This is secure but it is slow and inefficient, with the introduction of shard chains in the Ethereum upgrade, this blockchain is split up, enabling transactions to be handled in parallel chains instead of consecutive ones. This speeds up the network and makes for easy scaling.
How will Ethereum 2.0 be more secure?
The Consensus Layer has been designed with security in mind. Most proof-of-stake networks have a small set of validators, which makes for a more centralized system and decreased network security. Ethereum 2.0 requires a minimum of 16,384 validators, making it much more decentralized, less prone to the 51% attack—and hence, secure.
Ethereum 2.0 is technically not a new Ethereum, but an upgrade to make the Ethereum network making it faster, and more secure to accommodate the numerous programs and processes running on the network.
The Bitcoin blockchain serves as just a financial institution, meanwhile, Ethereum serves as both a financial institution and as a backbone on which other applications can be built, hence the need to make it more flexible and scalable has brought the much-needed upgrade nicknamed “Ethereum 2.0 or Eth2.”
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