What is Ethereum (ETH) 2.0 and how is it different from Ethereum

Ethereum as the second most popular type of crypto after Bitcoin has now had an improvement. This upgrade is referred to as Ethereum 2.0. Learn more about ETH 2.0 and its impact on cryptocurrencies here

Understanding what Ethereum (ETH) 2.0 is

Ethereum 2.0 is an anticipated upgrade to the Ethereum (ETH) network that promises to bring significant improvements to the overall network functionality and experience. 

Some of the more notable improvements involve the switch to Proof of Stake (PoS), shard chains, and a new blockchain called beacon chain. 

Ethereum 2.0 is based on the development of Ethereum which is growing rapidly but has problems with scalability. As the number of transactions on the Ethereum network increases, the fees for carrying out these transactions also increase (which are paid in the form of gas). 

This is where Ethereum 2.0 comes into play. ETH 2.0's proposed improvements to the Ethereum network are supposed to address, essentially, scalability issues. This upgrade will create differences with existing versions of Ethereum. 

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Difference between Ethereum and Ethereum 2.0

The biggest difference between Ethereum and Ethereum 2.0 involves the use of a Proof of Stake (PoS) consensus mechanism, shard chains, and beacon chains. To understand more, see the differences in full

Proof of Stake

Proof of Work (PoW) is Ethereum's way of keeping the network secure and complete by rewarding miners who create and validate blocks on the blockchain. 

Unfortunately, PoW is not scalable because it demands ever-increasing amounts of computing power as the blockchain grows.

Proof of Stake (PoS) solves this problem by replacing computing power with “participating in the game.” This means that as long as you have at least 32 ETH, you can commit it (stake), become a validator, and get paid by confirming transactions. 

Also read : What is Proof of Stake?

Sharding

Everyone who wants to access the Ethereum network must do so through a node. A node stores a copy of the entire network, meaning it has had to download, compute, store, and process every transaction since the beginning of Ethereum's existence. 

While users don't need to run a node just to transact, this makes things slower.

Shard chains are just like any other blockchain, except they only contain a specific subset of the entire blockchain. This helps nodes by only having to manage chunks, or shards, of the Ethereum network. This should increase transaction throughput and overall Ethereum capacity.

Also read: What is Sharding? Check out the meaning and benefits

Beacon chains

With shard chains working in parallel, someone has to ensure that they all stay in sync with each other. Beacon chains handle this by providing consensus to all shard chains running in parallel.

Beacon chain is a new blockchain that plays a central role in Ethereum 2.0. Without a beacon chain, information sharing between shards would not be possible, and scalability would be non-existent. 

The Journey Towards ETH 2.0

The launch of Ethereum 2.0 will not happen all at once. ETH 2.0 will be released in three phases, each accompanied by distinctive features to ensure the success of the new Ethereum.

Phase 0

The first phase, or phase 0, will be dedicated to the launch of the beacon chain as it is critical to the functionality of the shard chains. There will be no shard chains yet, but the beacon chain will start accepting validators (stakers) through one-way deposit contracts.

All validators who register and stake ETH cannot “unstake” until the shard chains are fully implemented. This indicates the ETH from the validator will be locked until the next phase.

Beacon Chain was launched on December 1, 2020 and has been running parallel to mainnet. After its launch, Beacon Chain did not process mainnet transactions. Instead, it runs parallel, reaching consensus by agreeing on active validators and their account balances.

Phase 1/1.5

The next phase was launched in 2021 and is a combination of two phases: phase 1 and phase 1.5. Phase 1 introduced shard chains, which allow validators to create blocks on the blockchain via PoS. Phase 1.5 is when the Ethereum mainnet will officially introduce shard chains and start switching from PoW to PoS.

The Merge

The Merge is an important step towards Ethereum 2.0 and the conclusion of the shift away from PoW. The Merge will shift the Ethereum blockchain consensus mechanism from PoW to PoS.

This stage involves switching the current Ethereum mainnet protocol to Beacon Chain. This is a big change as Ethereum transactions will now be carried out on the new PoS network. New ETH tokens will be minted by nodes on the network, staking a certain amount of ether tokens to secure the network and validate transactions.

The Merge is not like a hard fork that will result in two different versions of the blockchain. Ethereum will continue as one blockchain, and all user transaction histories will be combined. All transaction history currently stored on mainnet will not be lost; therefore, users do not need to take any action to protect their assets.

Phase 2

The final phase will be phase 2, where Ethereum 2.0 will support fully formed shards and become the official Ethereum network. Shard chains will also be able to work with smart contracts, allowing developers of DApps and other technologies to integrate seamlessly with ETH 2.0.

That was a glimpse of Ethereum 2.0. Understand the differences between the phases towards ETH 2.0 to learn more about cryptocurrency trends this year.

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