Ethereum 2.0 (also known as Eth2) is a substantial update to the Ethereum blockchain that is presently in development as open-source software.
The primary goal of the upgrade is to raise the network’s transaction throughput from the present rate of roughly 15 transactions per second to as high as tens of thousands of transactions per second or more.
To increase throughput, the workload is divided into many blockchains that run in parallel (this is referred to as sharding).
And then they are all connected to a common consensus proof-of-stake blockchain, so that to maliciously tamper with any single chain would require one to tamper with the common consensus.
Which would cost the attacker far more than they could ever gain from the attack.
It Is Planned That Ethereum 2.0 (Also Known as Serenity) Would Be Deployed in Three Phases:
Known as “The Beacon Chain,” Phase 0 was established on December 1, 2020, and is a proof-of-stake (PoS) blockchain that will serve as the core coordination and consensus centre for Ethereum 2.0.
In “Phase 1,” also known as “The Merge,” the Beacon Chain will be integrated with the present Ethereum network, allowing the network’s consensus process to be switched from proof-of-work to proof-of-stake.
As of the 26th of January in the year 2022, it is scheduled to be launched in the second quarter of the same year.
“Phase 2,” also known as “Shard chains,” will allow state execution to be implemented in the shard chains, with the existing Ethereum 1.0 chain slated to become one of the shards of Ethereum 2.0 in the near future. Chains of shards
Summary of the Report
The following is our Macro Report on Ethereum 2.0 (ETH 2.0), a multi-year system update to the Ethereum network, with the first phase of which is slated to deploy at the end of 2020 and bringing with it a new consensus algorithm
The Most Important Takeaways
- Proof-of-Stake and Sharding are two of the most important innovations that will be included in ETH 2.0 to increase the security and scalability of the network.
- As opposed to the more inefficient and possibly unfair Proof-of-Work method of distributing transaction validation responsibilities and rewards, Proof-of-Stake is a much more efficient and potentially fairer method of dispersing transaction validation responsibilities and rewards.
- Proof-of-Work, on the other hand, disproportionately rewards large miners while consuming copious amounts of energy on wasteful calculations to secure the network.
- Although difficult, sharding is one of the most promising techniques of increasing the scalability of a blockchain network, particularly when used in conjunction with layer 2 scaling solutions, which may enhance scalability by a factor of hundreds, if not thousands; and
- The implementation of ETH 2.0 will take place in three stages. Phase 0, which is scheduled to be deployed in December 2020, will solely include the implementation of the Beacon Chain. Sharding will be included in Phase 1. It is the case
In the blockchain, decentralisation refers to the degree to which ownership, influence, and value are distributed across a large number of different parties and organisations.
Due to the fact that there is no single entity that can rule the whole network, cryptocurrencies are considered “decentralised.”
We have witnessed diverse amounts of decentralisation in numerous projects such as Bitcoin, Ethereum, Ripple, EOS, and other cryptocurrencies, indicating that decentralisation is a spectrum rather than a binary “yes or no.”
The amount of defensibility that blockchain has against assaults from external sources, as well as the resistance of the system to manipulation, are all measured in terms of security.
In a blockchain system, there are several attack vectors, including the double spending assault, the Sybil attack, the DDoS attack, and the 51 percent attack, among others.
In general, greater freedom (i.e., the ability to freely enter and exit the network) results in greater decentralisation but lower security.
Because it is difficult to verify the identity of new participants in a network where they can all be owned by a single malicious entity or collaborate to cause harm to the network in a decentralised manner.
Among other things, the capacity of a network is determined by its scalability, which takes into account factors such as how many nodes are in the network, the amount of transactions that the network is capable of processing, how quickly the network can process, and so on.
When it comes to Bitcoin’s blockchain, the term “scalability” might be misleading because the network grows as more users join the network, which means the blockchain is scalable.
The complexity of the PoW system will be automatically adjusted, and the network may accept any number of nodes that are present in the network.
The Fundamental Characteristics of ETH 2.0
In an attempt to make Ethereum significantly more scalable and efficient while maintaining or perhaps increasing its security and decentralisation, ETH 2.0 is being developed.
With the implementation of proof-of-stake, the whole network will become more energy efficient and decentralised, while sharding will significantly increase scalability and throughput.
In this section, we’ll go through the consensus method that powers ETH 2.0, as well as sharding and other features
These are the major distinctions between proof-of-work (PoW) and proof-of-stake (PoS), the two basic consensus algorithms employed by cryptocurrencies, which will be discussed in further detail in the next section.
To guarantee that only legitimate transactions are confirmed, the Proof of Work (PoW) method, which is the technology powering Bitcoin and Ethereum 1.0, employs computationally hard computations and cryptography.
Because PoW involves expensive gear and a large amount of power, miners are disincentivised from acting dishonestly and damaging the network because their initial investments would be forfeited if they do.
The “Nothing is at Stake” Situation
A single block is typically submitted to validators at a time, which ensures that there will be no disagreement over which block is legitimate at any given moment.
During periods of high network traffic, however, it is possible that many blockages will emerge at the same moment.
Therefore, validators have a vested economic incentive in participating in every fork, as doing so allows them to collect rewards from whichever fork is ultimately chosen as the winner.
It is possible that agreement will be difficult to achieve as a result, making the network vulnerable to double spend attacks.
The Advantages of Proof-of-Stake
As previously mentioned, there are a number of advantages to using proof-of-stake rather than proof-of-work:
- Low energy consumption: Because PoS systems do not require the consumption of a considerable amount of electricity to protect the network, they are environmentally friendly.
- As a result of the fact that validators do not have to spend money on energy, fewer new tokens are needed to compensate validators, resulting in lower token inflation.
- The danger of centralization is reduced because economies of scale apply in proof-of-work mining, which means that miners with the largest pool of mining gear will receive a disproportionate amount of rewards. This, in turn, leads to centralization in mining pools over time.
- Proof-of-stake, on the other hand, rewards are distributed proportionately as a result of the structure of the voting mechanism, which means that each validator’s returns will be the same in percentage terms, and there is no incentive to staking more.
- Attackers who are dishonest are subjected to economic penalties by the network, whereas with PoW just energy is spent in the process of attempting to launch an assault.
People Also See:Luno Bitcoin & Cryptocurrency: The Ultimate Guide for Beginners
Economics in ETH 2.0
Secure the network and validate transactions will be rewarded for validators on ETH 2.0. I’m interested in learning how to become a validator and what type of results I may expect.
Acquiring Validation Skills
Once Phase 0 is implemented later this year, anyone with 32 ETH can become a validator. Medalla is the most recent testnet that may be staked at this time. Testnet Ether (gETH) is a dummy network that serves no use other than to verify the network’s functionality.
But if Phase 0 goes live later this year, the process of becoming a validator should be fairly similar to the current testnets’ approach.
Staking Options That Aren’t the Same
Running a node as a validator isn’t for everyone, but if you don’t want to deal with the difficulty or aren’t technically capable of doing so, don’t worry! Many service providers are prepared to assist consumers with staking in advance of the official introduction of ETH 2.0.