what is eth 2.0

What is Eth 2.0? Everything you need to know

Ethereum, which had its launch back in 2015, has grown to be a notable blockchain. Its native token Ether (ETH) has turned into the second-largest cryptocurrency, with the market cap reaching more than $487 billion. After its development back in 2015, the Ethereum 2.0 or Eth 2.0 upgrade is here.


Ethereum 2.0, commonly known as the Serenity or ETH 2.0, is an upgrade of Ethereum on multiple levels. The aim behind this upgrade is to surge up the capacity of Ethereum for transactional purposes. Besides, it reduces the fees and makes the network much more sustainable. For this purpose, Ethereum will resort to the consensus mechanism, which was previously Proof-of-Work (PoW), to the advanced Proof-of-Stake (PoS). 

Development of Eth 2.0

Ethereum 2.0 is a collective terminology for multiple upgrades, which are currently ongoing on the Ethereum blockchain. The Ethereum 2.0  caters to the scalability issues, transaction fees, and the challenge of Ethereum’s current Proof-of-Work blockchain. In colloquial language, the upgrades pace up the transactions per second. Further more, it will use less energy and will tend to be more secure. The launch of Ethereum 2.0 will be in several phases. The first phase, the Beacon Chain, went live last year in December 2020. 

The Beacon Chain tends to be a network, which has introduced stalking. Stalking is the locking of the crypto through the network codes. For running a Proof-of-Stake (PoS) consensus mechanism, stalking is the critical component. Currently, the Beacon Chain distinguishes itself from the Ethereum Mainnet.

The next phase of The Merge launches in the first half of 2022, which amalgamates the Beacon Chain with the Ethereum Mainnet. The final stage of Eth 2.0 involves sharding. Sharding is the progression of dividing the network into subsets of nodes for better efficiency. It allows Ethereum to expand the operations across several chains instead of combining all the transactions in a single blockchain like it was before. 

What is Consensus Mechanism?

To fully understand the purpose of Ethereum 2.0 and its developments, it is essential to understand the terminologies in line with the upgrade. One of the most significant ones is the Consensus Mechanism. Businesses usually have databases that hold the user data, such as emails and personal information. The blockchain is the type of database in which, instead of accumulating the information under one central location and supervision, it disperses among multiple locations and personnel. One of the prime advantages is in case of any lagging other computers are there to secure the data and keep the network alive. 

Thus, these individuals had to resort to ways to keep the correct set of data. Moreover, there is a need to organize all data matches. Therefore, the mechanism is needed to set up a consensus. It ensures that the data or transactions (in cryptocurrency) are consistent among various devices across the system. 

Why is Eth 2.0 moving to Proof-of-Stake?

Initially, the blockchains used Proof-of-Work (PoW) as their vital mechanism. PoW required the computer to compete against one another for transactions and get rewards in return. Thus, this mechanism proved to be energy-intensive and soaked up a lot of time. For this specific reason, Proof-of-Stake (PoS) is a viable route to some cryptocurrencies. It includes the Shariah-compliant cryptocurrency  Caizcoin as well. Hence, the update of Ethereum to Ethereum 2.0 transitioned to PoS, leading to a quicker process at lower fees. 

With PoS in hand, the consensus uses the algorithms that prefer nodes to win past the block of transactions. It distinguishes it from the previous mechanism, where nodes compete to win blocks incorporating large power amounts. When it chooses the node, it results in the forge of other transactional blocks within the chain. The stake pools are the nodes in PoS. These stake pools make up for the stocks they hold. The number of coins held in the stake pool is directly proportional to forging blocks and getting rewards.

Furthermore, the holders of the coin can even stake their holdings to the stake pool. When the nodes are selected to forge a block, there is a distribution of rewards among individual stakeholders. Currently, there are randomization elements in some of the PoS. It is to refrain from the older  stakes. Therefore, in this mechanism, the miners replace stake pools. It allows the audience to stake their coins. Hence, the individuals can accumulate their coins with respective stake pools. It is similar to miners joining the mining pools to gain hefty rewards. 

How Eth 2.0 plans to scale?

Ethereum 2.0 is planning to scale the capacity incorporating the method known as sharding. The PoS cryptocurrencies have adopted this coming-of-the-age technique and newer approach. It permits them to gauge without compromising the security and decentralization element. Therefore, sharding is the partition way of breaking databases into smaller manageable sets. 

Using the PoW blockchain, the nodes within the network had a complete copy of the past transaction history. It took ample space, particularly for older cryptocurrencies, with long transactional history. By using sharding, the blockchain breaks up into parallel selections. The nodes are, therefore, assigned to a single section instead of holding the entire database. Henceforth, there is a simultaneous process of many transactions, which leads to an increase in its speed.  

When Eth 2.0 will be released?

The Ethereum 2.0 upgrade is happening in multiple phases. The initial phase, ‘Phase 0’, is already live. This phase introduces a beacon chain, which is a new PoS blockchain. This blockchain will merge with the present Ethereum chain. The beacon chain becomes familiar  with PoS and uses Ethereum for staking and shard chains. It is eventually the testnet for future PoS versions. 

Merge is the second phase, or ‘Phase 1’. It is the representation of the official switch to the PoS consensus model. Consequently, the current Ethereum network in this stage merges with the beacon chain. The Ethereum developers term Merge as the ‘docking’, which will complete its launch in late 2021 or 2022. Following the aftermath of the Merge, Ethereum will be a PoS blockchain, allowing its users to stake and earn rewards. 

The third phase, or ‘Phase 2’, is the actual implementation of sharding. It is where Ethereum will scale and will move to higher transactional capacity. The shard will be implemented somewhere in 2022, after the Merge phase. 

Will Eth 2.0 affect the price of Ethereum?

The experts speculate that Ethereum’s upgrade to Eth 2.0 will follow an escalation in the prices. It will make Ethereum and its Defi network far more practical for the average person who does not own immense wealth. It is likely to have a drop in the transactional fees of Ethereum. Thus, this dip will be until a point that allows the users to move smaller amounts. At present, people with an immense amount of money can pay transaction fees.

However, we anticipate that those who stand to take advantage of the Ethereum upgrade will be those who do not have access to the modern banking system. These include citizens of the developing world, refugees and the 2 billion individuals deprived of contemporary financial products like banks and investment accounts. 

Conclusion 

Conclusively, experts anticipate that Eth 2.0 will be a huge success considering what it has to offer. Ethereum upgrade surrounds a notable buzz and noise. For those planning to invest in Eth 2.0 after its complete launch, we recommend doing thorough research. We suggest making a wise and timely decision and not getting carried away with the hype circulating the news. 

Frequently Asked Questions

Ethereum 2.0 will implement the method known as sharding, which will increase the transaction speed. Therefore, it predicts to scale up its ability to over 100,000 transactions per second. 

The Ethereum 2.0 upgrades are in process. But it is expected that the final phases of the upgrades will vanish off the ETH mining. The merge phase, all set to launch in late 2021 or 2022, will end proof-of-work mining, and the user will no longer be receiving mining rewards. 

Ethereum 2.0 is an upgrade to the existing Ethereum cryptocurrency. The motive behind this upgrade is to boost the scalability, speed and efficiency of Ethereum. It aims to surge the transaction numbers and address the bottlenecks. 

Sharding, a database technique for partition, is considered by the blockchain network andis tested by Ethereum. It will be splitting the blockchain to separate it with their data and separate it from the shards. 

On the Ethereum network, the transaction fees are called gas. The algorithm determines the transaction fees, which has its basis on how busy the blockchain is. But now, the users have the privilege to enter how much they want to make the payment and can bump up the fees to tip miners. It will assist them in verifying the transaction quickly. 

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