What is Ethereum 2.0?

Ethereum 2.0 is a popular idea in the Ethereum ecosystem. There was a need for an update to migrate the network from the Proof of Work (PoW) chain used by some cryptocurrencies.

In addition, this update is one of the planned updates to the Ethereum blockchain after its launch in 2015. In this case, the four stages of launching the Ethereum blockchain were planned.

The first stage was called Frontierto indicate the first build in July 2015. The second stage was called Homesteadand this happened in 2016. The next step was Metropolisdivided into two parts. These parts were two hard forks, including Byzantium 2017 years and Constantinople 2019 year. And now we have the final phase that will lead to the launch of Ethereum 2.0. The latter will be completed in three phases between 2019 and 2021.

In addition, Ethereum 2.0 will specifically address issues related to scalability, mining, security and others that are common in the current Ethereum 1.0. It comes with solutions like Proof of Stake (PoS), sharding and much more. Consequently, transactions will be faster if you provide the best way to host decentralized applications (dApps) and smart contracts.

The difference between Ethereum 1.0 and Ethereum 2.0

There are big differences between Ethereum 1.0 and Ethereum 2.0. These differences are in certain improvements that will be apparent in Ethereum 2.0, but not in Ethereum 1.0. These enhancements include Proof of Stake (PoS) and Shard Chains.

Proof of Stake

Ethereum 1.0 relies on Proof of Work (PoW), which is a consensus mechanism. This mechanism uses the processing power of miners, as well as electricity to add blocks to the distributed register technology. In contrast, there is a PoS mechanism that is an upgrade to PoW.

PoS offers greater scalability, security, and energy efficiency. It does not have much dependence on computing power and electricity. Rather, it takes advantage of validators and bids. Accordingly, Ethereum 2.0 uses the PoS mechanism as an upgrade to Ethereum 1.0, which distinguishes it from the latter.

Shard chains

Shard chains are called mechanisms that promote scalability, and they will be launched in Ethereum 2.0 (phase 1). These chains increase Ethereum throughput.

At the moment, one chain consists of consecutive blocks. This process helps to increase security and at the same time facilitates the verification of information. The disadvantage is that this affects the speed of transaction processing, especially during periods of high activity on the blockchain. This is because every complete node must check every transaction in sequential blocks.

Shard chains, on the other hand, offer a way to partition the Ethereum blockchain, thus sharing data processing across multiple nodes. Thus, transactions are processed in parallel, not sequentially. There is also a limited amount of data that each block can contain. You could say that a chain shard is the addition of another lane that turns the Ethereum blockchain into a highway with multiple lanes instead of just one lane.

Ethereum 1.0 related issues

Ethereum 1.0 is riddled with several issues that require updates. These updates will require code changes and changes that must be approved by the Ethereum community. These changes will also be posted to the existing network. Accordingly, the changes will deal with existing problems in Ethereum 1.0, and some of these problems:

Scalability

Ethereum 1.0 has repeatedly said that it is slow due to transaction processing speed. This speed means that five transactions are processed every second, which are still considered slow. And if the number of pending transactions is greater than this block can contain, pending transactions should be moved to the next block.

The same can be said for the speed with which it hosts decentralized applications and smart contracts. Moreover, the Ethereum ecosystem is growing and this slowdown may continue. Therefore, we can say that scalability is one of the main problems of Ethereum 1.0. And partitioning is a mechanism that can potentially improve network scalability.

Security

Another notable issue with the Ethereum network is the issue of security. For example, report 2019 revealed 44 vulnerabilities to which the network could be exposed. At the application level, there were 26 vulnerabilities on which DApps and smart contracts for their development rely. Among them, it should be noted the vulnerabilities associated with the development of the Ethereum blockchain and its implementation.

Mining difficulty

There are times when developers have to switch from PoW mining to PoS mining. This increases the complexity of mining, which in turn slows down mining rewards. A solution to this problem has not been provided, and as such, it is still an apple of discord in the ecosystem.

Costs

In 2019, Ethereum co-founder Vitalik Buterin noted that using the Ethereum network is expensive. Buterin stressed that the network is almost full. Thus, a large organization wishing to join will hold back as they will have the impression that it is competing with others for a place for transactions. In addition, an organization that decides to use the network will only increase its value.

Ethereum Proof of Stake (PoS)

Proof of Stake (PoS) is a major change in Ethereum 2.0 as it brings significant changes to the reward structure of miners on the Ethereum blockchain. Ethereum currently uses a Proof of Work (PoW) mechanism. PoS will be launched in Phase 0 of Ethereum 2.0.

PoW focuses on miners working on pools and using computing power to solve mathematical problems. These miners compete to solve these problems in order to mine a block. Miners also receive rewards for using their resources to verify these transactions.

It is also worth noting that PoW is safe, since a person will need a lot of computing power to compromise such a network. And such computing power will cost an unrealistic amount of money. Despite the secure nature of PoW, they have several problems, ranging from accessibility and scalability. These limitations have led to the need for a PoS mechanism.

PoS eliminates miners and the electricity needed for the PoW mechanism. These two main components have been replaced by validators. Here, validators take the place of miners, and they are the people who maintain the state of the network. They also receive rewards for choosing the next block. This, therefore, is different from PoW, which requires miners to use electricity to generate physical energy to validate blocks.

Rewards are calculated using the state of the network at the time the era ends. The remuneration rates on an individual basis depend on the validator number and the percentage of the validator's operating time. Moreover, the reward that a person receives when he is elected as a validator may differ from what he ultimately receives.

Roadmap ethereum 2.0

Ethereum 2.0 has been divided into three main steps to provide a clear roadmap to follow. Here is a detailed outline of each of these steps.

Phase 0
Phase 0 is the initial stage of Ethereum 2.0, and its launch was scheduled for 2020. This phase will lead to the release of a chain of beacons where PoS will be apparent. A chain of beacons will also help in managing validators whose role is to validate blocks.

However, there is a criterion for the appearance of a beacon chain genesis block. The requirement is that a base amount of 524 ETH must be split and distributed among at least 288 validators. The minimum number of validators was not randomly selected, but a decision was made on their role in providing a secure and decentralized network. In addition, rewards for bets will be distributed only after the threshold is completed.

It is also worth noting that PoS may not be useful for the ecosystem at this stage. Here phase 0 will not be able to host dApps and will not process transactions. This is due to the high-level testing that is required before users complete millions of transactions on the blockchain.

In addition, PoW will still be apparent even after the beacon chain is launched with the launch of PoS. Consequently, Ethereum 1.0 will continue to be active even after the release of the new blockchain, to ensure that the Ethereum ecosystem is not negatively affected. Here, the old blockchain will work together with Ethereum 2.0, but in phase 0, updates to the original network will be made. It is in phase 1.5 that there will be a merger between both blockchains to create a single network.

Phase 1
There is uncertainty as to when Phase 1 will take place, as the date has not yet been set. However, there are expectations that it will be launched after a chain of lighthouses and a year after the launch of the latter. On the other hand, in Phase 1 will be presented chains of fragments (shard chains), the purpose of which is to increase the scale of the network. Here, the blockchain will be divided into 64 chains, and these chains will run in parallel to each other.

Moreover, these chains of fragments guarantee that 64 blocks are processed each time, which increases the speed of transactions. This divides the data load between the blocks, since the chains work simultaneously with each other. The latter is different from Ethereum 1.0, which processes the block at a time. And more transactions pending in the queue will remain there until the block completes processing before these transactions are confirmed.

Phase 1.5
Phase 1.5 focuses on creating a single Ethereum network by combining old and new blockchains. Thus, it can be called a merger between PoW and the PoS chain. The combination will be carried out by moving Ethereum 1.0 to Ethereum 2.0, and the original block chain will become a chain of 64 fragments working with the lighthouse chain.

Combining both blockchains also provides an advantage that allows owners of native assets to use it in Ethereum 2.0. For this reason, they do not need to change their token in order to use it in a new chain. There is also no risk that their current tokens will become obsolete or unusable. On the contrary, the history of PR will continue to exist, even if there is no need to support the PR mechanism. The latter will act as one of the PoS shards in the new blockchain.

Phase 2
There is still some degree of uncertainty regarding the events or improvements that will occur in stage 2. However, the little information provided indicates that the stage will involve transactions, the execution of smart contracts, transfers, withdrawals, etc.

After phase 2
The successful completion of phase 2 will lead to further updates to the Ethereum blockchain. Therefore, this stage will not mark the end of these events. After the stage, there may potentially be more chances to improve network features and utilization.

Ethereum 1.x
Ethereum 1.x is a planned phase where Ethereum 1.0 will exist until Ethereum 1 Phase 2.0. Moreover, 2.0 will be fully functional in phase 2, and before that, there will still be improvements in Ethereum 1.x. Therefore, the overall focus will be on any blockchain, as the ecosystem still needs to be maintained while work is being done on the PoS blockchain.

Staking on Ethereum 2.0

Validators must deliver at least 32 ETH before they can verify transactions in Ethereum 2.0. Moreover, 32 ETH is deposited in a deposit agreement created by the Ethereum Foundation.

In addition, validators must use Ethereum 2.0 client software. After starting the software, these validators will be randomly selected to confirm the blocks in the block chain. Validators who propose and confirm these blocks correctly receive ETH, which is a percentage of what they supplied.

There is also an incentive for validators to stay online and perform their computing duties. This is due to the fact that validators who go offline and do not fulfill these responsibilities have a moderate reduction in block remuneration. In addition, the validator may lose some or all of the accumulated ETH if it tries to be doubtful. Here, they can try to check for an incorrect data history that could endanger the network.

Blockchain Attacks

There is a clear difference between the result of a failed PoW attack and the PoS mechanism. In PoW, the risk of such an attack will be equivalent to the cost of electricity needed to achieve the required hash power.

Alternatively, the risk of launching such an attack in a PoS mechanism is the loss of ETH broken down by stakes. Moreover, an individual is more likely to realize the fact that he can lose his ETH stake by launching an attack, compared to electricity costs, which may not be clear from the very beginning.

Therefore, the miner has a greater incentive to adhere to the recommendations and try not to launch an attack on the network in PoS. Thus, the network is more robust and even more secure than the PoW mechanism.

Entry barrier

The entry barrier to PoW and PoS has its advantages and disadvantages. For example, a miner in PoS does not need to set up expensive mining installations or receive equipment or constant electricity for mining. However, not everyone can afford at least 32 ETH (about $ 6000), which is the minimum to become a validator.

In addition, there is still a need to establish experienced people who may also be interested in running and managing client software without downtime and cost savings. However, there are expectations that Eth2 will remove some of these entry barriers to PoS.

There is also an offer of rate services by a number of companies. This means that to start your own client does not require technical knowledge. These companies manage the operation for their customers, and customers put their 32ETH. However, service charges apply.

And often in the case of PoW, a person can join a betting pool. They can do this if they are not able to fulfill the minimum 32 ETH that is required. In this case, the remuneration they receive will be equated to the total contribution.

Hack and predictor Aviator

Ethereum 2.0 comes with different phases and promises to fix the scalability and security issues that are common in Ethereum 1.0. PoW will be replaced by PoS, and the high cost of mining and the likelihood of fraud will be reduced. Later, both blockchains will be combined into a single one. The goal is to promote the Ethereum ecosystem and expand the adoption of blockchain technology.