What is Ethereum 2.0? Here is what you can accomplish
Ethereum 2.0, also called Eth2 or ‘Serenity’, is the next upgrade to the Ethereum blockchain.
Ethereum 2.0 will be released in multiple “Phases” starting in 2020 with Phase 0.
Each phase will improve the functionality and performance of Ethereum in different ways.
Ethereum 2.0 is not a new idea in the Ethereum community.
A shift in Ethereum’s underlying consensus mechanism to address the restrictions of a Proof of Work blockchain has existed since the blockchain’s genesis.
Ethereum 2.0 arrives on the heels of many planned upgrades to the Ethereum mainnet following the mainnet Frontier launch in July 2015, namely:
- Homestead, March 2016
- Metropolis: Byzantium, October 2017
- Metropolis: Constantinople, February 2019
- Istanbul, December 2019
What is Proof of Stake in Ethereum 2.0?
Proof of Stake (PoS) is an upgrade from Ethereum 1.0’s current Proof of Work consensus model and allows for improved security and scalability.
PoS is a consensus mechanism that relies on validators and staked ETH for the continuation of blocks on the blockchain and is necessary for sharding.
Validators are people who elect to continue the blockchain by depositing (or “staking”) 32 ETH into the deposit contract. On a continuous basis, validators are randomly selected from the pool of all validators to be given the opportunity to create the next block.
Should a validator successfully validate a block, they will receive an ETH reward. If a validator attempts to compromise the truthful continuation of the blockchain, their deposit will be ‘slashed’ – meaning they will lose some or all of their 32 staked ETH.
A Proof of Stake mechanism offers more crypto-economic security compared to the more abstract disincentive of losing the cost associated with electricity.
Rather than investing in an enormous mining facility to defray the cost of electricity to mine blocks in PoW, staking on Ethereum 2.0 will only require a consumer laptop (some software clients aim to be lightweight enough to run on a cell phone, thus reducing the barrier to entry to participating in the consensus process, consequently increasing the decentralization of the network).
Proof of Stake will go live in Phase 0 of Ethereum 2.0.
Working of the Ethereum 2.0
Launching of the beacon chain and beyond
Phase 0 :
Eth2 is set to roll out in phases, beginning with Phase 0 in 2020.
Phase 0 will launch the beacon chain of the Ethereum 2.0 network.
The beacon chain will implement Proof of Stake and will manage the registry of validators, who will begin attesting blocks into existence on Ethereum 2.0.
In order for the beacon chain to launch its genesis block, at least 524,288 ETH must be staked on the network, divided among a minimum of 16,384 validators (these numbers were decided upon to ensure sufficient security and decentralization).
Staking rewards will not be distributed until this threshold is reached, which is partially why some altruistic behavior is needed among the early participants in phase 0.
There is no firm launch date for Phase 1 yet, but it is anticipated in the year following the launch of the beacon chain in Phase 0.
The primary improvement of Phase 1 is the implementation of shard chains, the scalability solution mentioned earlier in this article.
For Ethereum 2.0, sharding will result in the Ethereum blockchain being partitioned into 64 separate chains (called shard chains) that run parallel to one another and interoperate seamlessly.
Sharding addresses scalability by allowing Ethereum to process multiple transactions simultaneously: theoretically, 64 blocks at a time.
Phase 1.5 :
Phase 1 is the merging of the original PoW Ethereum blockchain with the new PoS chain.
This moment is being referred to as Phase 1.5 in the Ethereum community.
Specifically, the PoW Ethereum blockchain will be brought into Ethereum 2.0 and exist as one of the 64 shard chains alongside the beacon chain, meaning there will be no break in continuity or data history.
Phase 2 :
Phase 2 is currently less defined than either Phase 0 or Phase 1.
We do know, however, that with both Proofs of Stake and sharding successfully implemented, Phase 2 will enable––among other things––ether accounts, transactions, transfers and withdrawals, and smart contract execution.
Ethereum 2.0 will primarily benefit the scalability, throughput, and security of the Ethereum public mainnet.
Ethereum 2.0 will not eliminate any of the data history, transaction records, or asset ownership of the Ethereum 1.0 chain.
The Beacon Chain – which will be the backbone of Ethereum 2.0 – will be fully functional with the existing 1.0 chain, ensuring continuity.
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How will Ethereum 2.0 affect price?
Ethereum is in high demand and will trigger an unforeseen change in its price. Eth 2.0 attracts large investments from institutions and retail investors due to the attractiveness of the staking rewards.
What will Ethereum be worth in 2020?
Ethereum might reach as much as $ 1,455 by the end of 2020. It was also predicted that it can reach about $1000 by May 2020.
What will Ethereum be worth in 5 years?
It would be difficult to forecast what is going to happen in the next 5 years. As eth 2.0 is in huge demand, ethereum or cryptocurrencies might climb up again or they can drastically fall down if any big country economically bans it.
Should I buy Bitcoin or Ethereum?
For deciding what to buy, first, we should know that they both are different platforms and have different use cases. Bitcoin acts as a store of value and Eth is considered as a new decentralized computing network for application development.
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