What is Ethereum 2.0?

Ethereum 2.0 is the new Ethereum. Ethereum 2.0 represents the next advancement in blockchain technology and cryptography. The most significant change that occurred in mid-September 2022 is a move from the proof-of-work (PoW) paradigm to the proof-of-stake (PoS) model, which aims to increase the blockchain network's security and scalability. The transition to a PoS model has been accomplished, and Ethereum is now officially a PoS model.

The modifications are part of "Ethereum 2.0," an umbrella phrase for Ethereum's next evolution into a better-performing, more accessible network. Sharding is also included in the upgrade, which allows transactions to be processed concurrently over smaller chains, resulting in better transaction times. In this article, we will learn about What is Ethereum 2.0, A distinct comparison between Ethereum 2.0 & Ethereum, its release date and its history.

Ethereum 2.0: Explained

Ethereum 2.0, often known as Eth2 or "Serenity," is a blockchain upgrade. The upgrade intends to improve the Ethereum network's speed, efficiency, and scalability so that it can avoid bottlenecks and handle more transactions at the same time. However, Ethereum 2.0 does not actually exist—the Ethereum Foundation said in January 2022 that it would stop referring to the upgrade as Ethereum 2.0. The rebranding is meant to reflect the reality that a network upgrade is taking place rather than the introduction of a new network. 

As a result, Eth1 is now known as the "execution layer," which houses smart contracts and network rules, whereas Eth2 is known as the "consensus layer," which guarantees that devices contributing to the network are behaving in line with regulations. Ethereum 2.0 has been evolving for several years and is not a one-time occurrence. It began with the debut of the Beacon Chain in December 2020, which enabled the staking of Ether, the Ethereum network's native asset.

Staking is the process of keeping tokens for an extended length of time in order to support the crypto network's security and validate blocks within the blockchain network. These investors are rewarded for their efforts through a procedure called proof of stake (PoS). In other words, Ethereum has transitioned from a proof-of-work (PoW) model to a proof-of-stake (PoS) model or consensus mechanism, with the latter aiming to increase the blockchain's security and scalability.

Ethereum 2.0 is comprised of three major milestones, the first two of which are currently complete:

• Launch of the Beacon Chain — complete

• The Ethereum Merge — complete

• Ethereum Sharding — Yet to happen

Step 1: Ethereum Beacon Chain

The Beacon Chain was the initial step in transitioning Ethereum from a proof-of-work to a proof-of-stake mechanism. It was a test to ensure that PoS was a viable option for Ethereum's blockchain before introducing it to the community. When the test was successful, the PoS mechanism began to work alongside the prior PoW system as the next round of development began.

Step 2: Ethereum Merge

Following the establishment of the Beacon Chain, the Ethereum Merge occurred. PoS and PoW coexisted prior to the Merge, although the merge’s objective was to eliminate the necessity for PoW.

The ultimate goal is to put a stop to energy-intensive mining. Other advantages include less environmental harm, higher scale usefulness, and enhanced security.

On the Ethereum Mainnet, the blockchain data acquired since Ethereum's creation remained distinct. The Merge combined the two to form a single mechanism focused to PoS consensus.

Step 3: Ethereum Sharding

Sharding is the penultimate step in Ethereum's upgrade roadmap, but it is not projected to be completed until 2023. While the previous stages were concerned with security and long-term viability, Ethereum Sharding is concerned with scalability and encouraging network involvement.

Sharding: Sharding is the technique of horizontally partitioning a database to share the load; it is a common idea in computer science. In an Ethereum environment, sharding will complement layer 2 rollups by spreading the burden of handling the vast quantity of data required by rollups over the whole network.

Returning to the Ethereum network, Sharding aims to reduce transaction latency and network congestion. It is believed that growing data availability eliminates the need for costly computing gear. As a result, anyone with a standard phone or laptop will be able to contribute to network security.

Ethereum 2.0 Release Date

The second phase began early in 2022 with a series of "merges" with testnets, culminating in a September 2022 merge with the Ethereum mainnet. These merges are just Beacon Chain integrations with various testnets. Following the merger, Ethereum is now officially working on a PoS mechanism.

All of the latter modifications concern the network's consensus process, but the Ethereum 2.0 upgrade will also include the installation of sharding, which addresses the network's scalability. Sharding comes after merges and is the last stage of the Ethereum 2.0 transition. This phase is expected to be completed by 2023. There are plans for adjustments after sharding, but these are not the present priority. The Ethereum network is constantly being improved.

Ethereum 2.0 Vs Ethereum

In December 2020, Ethereum launched two parallel blockchains: a legacy one that uses proof of work (Ethereum Mainnet) and a new chain that uses proof of stake (Beacon Chain). The merger united Ethereum's Mainnet and Beacon Chain into a single blockchain that uses a proof of stake algorithm.

Since its inception in 2020, the Beacon Chain has served as a proof-of-stake ledger on the Mainnet. ETH1 and ETH2 were the original names for the Ethereum Mainnet and Beacon Chain, respectively. Their final merger was to be known as Ethereum 2.0. However, in January, the Ethereum Foundation requested that the moniker "Ethereum 2.0" be phased out. The Foundation determined the language was no longer an accurate representation of its roadmap.

They thought Ethereum 2.0 sounded too much like a distinct operating system, which is not what the merger is meant to accomplish. The Ethereum Foundation also requested that people stop using the term "Ethereum 2.0" and instead use "ETH1" and "ETH2" when referring to the Ethereum Mainnet and Beacon Chain, respectively. This phrase, they believe, better reflects their platform aspirations. Many cryptocurrency investors and fans, however, continue to refer to post-merge Ethereum as Ethereum 2.0.

Will Ethereum 2.0 Be a New Coin?

There is no new cryptocurrency as a result of the Ethereum 2.0 updates. One of the primary reasons developers changed the term "Ethereum 2.0" to "Ethereum upgrades" is to avoid confusion. Those who own ETH are not required to take any action. ETH can still be used in the same way it has always been used – for trading, staking, exchanging, and other standard operations.

Binance has issued a warning that anyone requesting "ETH2" tokens from users may be a fraudster. Any communication implying that monies be given to an unknown third party should be ignored. Crypto frauds are common, and holders of digital assets should be wary of any strange activity.

Ethereum 2.0 Vs Bitcoin

Bitcoin and Ethereum are the most popular cryptocurrencies, accounting for over 60% of the worldwide cryptocurrency market capitalisation. In the last five years, the price of Ethereum has increased by 453%. This is more than Bitcoin, which has increased by more than 431% during the same time span.

From environmental, social, and corporate governance (ESG) standpoint, the merger makes Ethereum a more appealing investment than Bitcoin, but it does not necessarily make Ethereum a danger to dethrone Bitcoin as the world's top currency. According to Chris Kline, co-founder and chief operating officer of Bitcoin IRA, Bitcoin and Ethereum are more complementary than competitive in the crypto market.

Proof-of-Stake Vs Proof-of-Work

Decentralized transaction validation is required for blockchains such as Ethereum. Ethereum, like Bitcoin and other cryptocurrencies, currently employs a proof-of-work consensus process.

Miners in this system employ the computing capacity of a machine to solve challenging mathematical puzzles and validate new transactions. The first miner to solve a challenge adds a new transaction to the blockchain's record of all transactions. They are then rewarded with the native coin of the network. This method, however, can be extremely energy-intensive, especially when the processing power utilized by miners who did not solve the problem is wasted.

Instead of relying on miners, proof of stake allows individual users to stake a network's native coin and become validators. Validators, like miners, validate transactions and ensure that the network is not executing false transactions. These validators are chosen based on how much cryptocurrency they have staked and how long they have staked it.

Other validators can then certify to locate a block. A block can be added to the blockchain once there are enough attestations. The successful block proposition is then awarded to validators. This is referred to as "forging" or "minting."

How could Ethereum 2.0 affect Ethereum’s price?

More scalability equals higher consumption, which leads to more demand. In theory, this should drive the price of Ethereum to new highs.

"By the time ETH 2.0 and rollups function together, there will be 100,000 transactions per second capability. That means the next billion individuals will have a fully seamless experience." Jamie Anson, founder of Nifty Orchard and Ethereum London organizer stated.

Furthermore, as the ecosystem recognizes key accomplishments, Ethereum developer enthusiasm will be strengthened. "This will have a long-term beneficial impact on the price of ETH—regardless of the short-term volatility that is inherent in crypto-asset values," Cutler noted.

Conclusion

Ethereum 2.0 is a significant upgrade to the Ethereum network, converting it to a proof-of-stake (PoS) model from a proof-of-work (PoW) paradigm and making it more efficient. The Ethereum Foundation explained the modification as follows: "Consider Ethereum to be a spaceship that isn't yet ready for interplanetary travel. The community has constructed a new engine and a hardened hull with the Beacon Chain. After extensive testing, it's almost time to change out the new engine for the old in mid-flight."

This development might have far-reaching consequences for the cryptocurrency industry. It may put additional pressure on Bitcoin to reduce its energy use.

Ethereum 2.0 FAQs

Will Ethereum 2.0 replace Ethereum?

Technically, the Ethereum 2.0 upgrade is not a substitute for Ethereum. It is better described as a merger. The Ethereum.org FAQs for Eth2 also mention that "thinking of Eth2 as a separate blockchain is not appropriate.

What happens ETH when 2.0 comes out?

The ETH will remain unchanged in the days leading up to the Merge. ETH holders who are solely interested in keeping, trading, or utilizing their ETH on decentralized applications (dapps) are not required to actively prepare for the Merge.

Can eth2 be mined?

Mining Ether will no longer be necessary now that Ethereum has transitioned to a proof-of-stake basis. As a result, mining equipment will become obsolete, leaving miners with fewer options.

What is the Beacon Chain?

The Beacon Chain is the first phase of the Ethereum 2.0 rollout, serving as the backbone of the new network and introducing the PoS consensus mechanism.

What is Proof-of-Stake?

Proof-of-Stake (PoS) is a consensus mechanism that allows users to "stake" their cryptocurrency to participate in the network and validate transactions, instead of using mining equipment as in Proof-of-Work (PoW).

What is sharding?

Sharding is a technique that breaks the blockchain into smaller partitions or "shards", enabling parallel processing of transactions and improving the network's scalability.

What is eWASM?

eWASM is the new smart contract language being introduced with Ethereum 2.0, offering improved efficiency and compatibility with existing web development tools.

What are the benefits of Ethereum 2.0?

Ethereum 2.0 promises several benefits, including increased scalability, improved security, reduced energy consumption, and increased accessibility for developers and users.

Can I still use Ethereum after the transition to Ethereum 2.0?

Yes, Ethereum will continue to exist alongside Ethereum 2.0, and the transition will be gradual, with both networks coexisting for a period of time.

How can I participate in Ethereum 2.0?

To participate in Ethereum 2.0, users can become validators by staking their ETH on the network or by delegating their stake to a validator pool. Validators are responsible for validating transactions and maintaining the network.