In order to solve various issues plaguing the world’s second largest blockchain network, Ethereum is looking for an upgrade after seven years.
Ethereum 2.0 (eth2) is an upgraded version of Ethereum blockchain that is the second largest cryptocurrency in the world today with $372 billion market capitalization. It is developed with a vision to improve the scalability, speed, and efficiency of the existing Ethereum blockchain.
An Ethereum 2.0 upgrade is an attempt to improve the network. As Ethereum has grown rapidly, its network has been clogged with more transactions.
Currently, it can handle only 15 to 45 transactions per second, which sounds impressive, but if you compare it to the numbers on the Ether network, it is not enough to handle all of the users across the globe. Due to the high demand, the transaction fees are very high and keep on climbing.
After the upgrade, Ethereum 2.0 could be a game changer.
It will create a network that could potentially process thousands of transactions per second. It will also create a much more sustainable network without the energy-intensive mining and introduce smart contracts to the broader world, increasing Ethereum’s real-world utility.
What is new in Ethereum 2.0?
Currently, Ethereum architecture is maintained by a Proof of Work (PoW) consensus mechanism, which will be changed to Proof of Stake (PoS) in Ethereum 2.0.
PoS will replace the two primary components of PoW (miners & electricity) with validators and will bring new reforms in the crypto-economic incentive structure for validating the blockchain.
Ethereum 2.0 will be using a sharding process that divides a blockchain into various blockchains. The sharding process enables the entire network to work as a solitary validator to handle the whole workload as a single entity or process.
There are various validators, and each validator has to maintain their shard that keeps track of information. Unlike blocks in the blockchain, the validators are mixed up to prevent alteration or manipulation of data.
Sharding will also increase the number of transactions on the network and make it possible to verify and validate more than thousands of transactions in a second.
This makes Ethereum 2.0 more superior and powerful than Ethereum. The upgrade will help speed up processing transactions that are handled easily in parallel chains.
Ethereum’s PoW mechanism currently requires a lot of energy for mining. With a mission to cut carbon footprints becoming a major theme in the cryptocurrency industry, Ethereum 2.0 will be better for the environment as there will be no more mining involved.
In an interview with Bloomberg TV, Ethereum Co-Founder Vitalik Buterin said that Ethereum’s energy consumption will be diminished ‘by a factor of more than 1,000’ with PoS implementation.
Is Ethereum 2.0 secure?
Ethereum 2.0 will add more security to the Ethereum network.
While most PoS networks require few validators, resulting in decreased network security, Ethereum 2.0 needs large sets of validators, making it more decentralized and safer.
With sharding, it will provide more security to transactions, which was not possible in the proof-of-work consensus method.
Future Ethereum 2.0 upgrades?
Beacon Chain: It is in a testing mode launched in 2020 which allows staking processes in the network. It has opened the doors for future upgrades. When it goes live, the Chain will be the cornerstone of Ethereum 2.0.
Merge: The Ethereum Merge is expected to be launched later this year or in 2022. This will combine Beacon Chain and Ethereum’s mainnet. It will make staking on the Ethereum blockchain a reality, while ending the mining process on Ethereum network.
The transition of Ethereum to Ethereum 2.0 is a major development that solves the issues plaguing the network and could potentially lead to wide-scale adoption of the blockchain while potentially strengthening the Ether market in the longer run.
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