Ethereum 2.0: Will It Make Ethereum Better, Faster, Stronger?
The crypto world has changed radically over the last decade, and every once in a while, even the most established players need to adapt. Ethereum is no exception, and the launch of Ethereum 2.0 has been a long-awaited move to make the protocol faster and more capable. Let’s look at what the update will look like, and what it really means.
One of the greatest problems the cryptocurrency world has faced over the past few years is the lack of scalability and efficiency of many major protocols—including Ethereum. This has led to many competitors emerging in the space to provide alternatives, but Ethereum itself has now come out with its own solution to maintain its position: Ethereum 2.0.
The move has attracted plenty of attention—but what is Ethereum 2.0, what makes it so special, and why was it so necessary to replace the original Ethereum in the first place? We’ll answer all this and more.
What is Ethereum 2.0?
The Ethereum team first started working on Ethereum 2.0 (sometimes called Eth2 or Serenity) as a new-and-improved version of the Ethereum blockchain. It’s been in the works for a very long time now, with the project beginning in 2020 and not set to end until 2023.
This transition involves a few phases:
- The Beacon Chain (December 2020)—introduced staking to a separate blockchain
- The Merge (Q3 or Q4 in 2022)—will add the Beacon chain to Ethereum
- Shard chains (no date set)—will spread operations across 64 different shard chains instead of just one blockchain
The main focus of all this is to make Ethereum faster and more scalable by making changes to its consensus mechanism—but we’ll delve more into this shortly.
A rebranding opportunity
The term “Ethereum 2.0” has given Ethereum a convenient opportunity to carry out a much-needed rebrand. Over the past few years, crypto OGs like Bitcoin and Ethereum have received their fair share of negativity due to environmental concerns and doubts about their scalability. Meanwhile, Ethereum competitors like Polygon and Solana have received praise for righting some of these wrongs—leaving Ethereum vulnerable.
Yet despite the name, Ethereum 2.0 isn’t something that can be completely separated from the original Ethereum. It’s an upgrade rather than a new platform, and when this process is complete, everyone will be able to access it in much the same way as before. In fact, the team hopes to phase the name out.
How is Ethereum 2.0 different?
It’s all very well saying that Ethereum 2.0 will be a bigger, better, and stronger version of Ethereum 1.0. But what specifically is it changing? It’s time to get technical.
From PoW to PoS
Perhaps the most notable difference between the original Ethereum and Ethereum 2.0 is the move from proof-of-work (PoW) to proof-of-stake (PoS). Both are consensus mechanisms: Methods that allow protocols to remain decentralized while verifying transactions to ensure that everything is legitimate.
Bitcoin used PoW from the get-go, making it the default consensus mechanism in the early days of the blockchain. Unsurprisingly, Ethereum followed suit. The PoW process involves miners, who solve cryptographic puzzles of increasing difficulty using computer power. This is secure since the computational power needed removes any incentive to misbehave. However, over time, PoW received criticism for being too energy-intensive, making it slower and less efficient and also worse for the environment.
So, what about PoS? It replaces mining with staking, which means tokenholders “bet” their crypto holdings on a transaction being legitimate, receiving a reward for doing the right thing or a penalty if they’re wrong. Because this process doesn’t require increasing computer power, it’s more efficient—bringing a range of other benefits.
The efficiency of staking means it’s more scalable; as a result, Ethereum would be able to handle more complex dApps, more users, and more transactions using PoS.
Plus, once sharding is also implemented, Ethereum will be able to process even more information. This makes it a much more viable platform with more use cases.
Ethereum 2.0 is set to be faster—not only because of the move to PoS, but also due to the shift to multiple shard chains that can handle transactions simultaneously.
Specifically, the team hopes Ethereum will go from handling 30 transactions to 100,000 per second.
There’s no use in having a new and improved Ethereum if it can’t be relied upon. Although Ethereum was always relatively secure, the fact that it’s becoming more decentralized with more validators and shards will only make it better.
The more people are involved in validating transactions, the harder it is for one individual or a small group to take control. Also, PoS is more accessible, which gives some power back to “the people” rather than mining farms run by huge corporations. This is a good thing for decentralization and security.
Plus, with staking, the risks of acting maliciously are even greater than under PoW – you won’t just be wasting computer power, but could also lose some of your ETH holdings.
You might worry that all these extra features come at a price. In reality, the fact the upgraded platform will be more efficient means that gas fees should decrease—part of the reason they were so high before was because of the energy needed to complete so many complex processes.
Ethereum has already made some progress toward this with its Ethereum Improvement Proposal 1559, which moved from a fee to miners to a base fee.
So, lower fees, better security, greater scalability, and faster transactions. Can you see what all the fuss is about now?
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Ethereum fans have been excited about the move to 2.0 for a while now, and for good reasons. But Ethereum’s competitors have also been making big moves, so don’t discount them yet.
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