Ethereum 2.0 or Eth2 is a major upgrade to the current Ethereum ecosystem. Currently, Ethereum can handle 30 transactions per second and consumes nearly 50 terawatt-hours’ worth of electricity annually (comparable to the consumption of a small country like Peru). After the transition to Eth2, the network will be able to handle 10,000 transactions per second and only use 1% of that electricity.
Sounds too good to be true? It’s not. Eth2 is completely based on technological improvements. Let’s try to understand how Eth2 will change everything about Ethereum.
What is Ethereum 2.0?
In the simplest terms, Ethereum 2.0 is a major upgrade over the current Ethereum (Eth1). This upgrade will be performed in a phased manner. The first phase has already been implemented successfully.
Few key highlights of Eth2:
- Ethereum will switch to Proof of Stake from Proof of Work. You’ll need to stake ETH to earn ETH dividends by validating blocks. Mining will not be possible anymore.
- The network will become much more efficient and faster.
- Ethereum will be able to carry out more and faster transactions per second.
- Building apps will be safer and easier on the new technology.
- The Ethereum blockchain will be “sharded” into several sub-chains, thus increasing network security.
What will not change?
- ETH will remain to be the native cryptocurrency of the platform.
- Eth2 will still be a peer-to-peer, decentralized network.
- ETH could still be used for payments, investment, and trading – even more effectively.
How is Ethereum Different From Bitcoin?
Bitcoin Core, or BTC, is the first widely adopted cryptocurrency. It’s seen as digital gold – an asset with a store of value. Gradually, BTC has become a long-term investment technique for people.
BTC started in 2009 as a peer-to-peer digital currency. However, it has become slow and expensive to do small transactions on the BTC network. Ethereum is the most popular alternative to that. BTC and ETH are the first and second cryptocurrencies by market capitalization, respectively.
On top of being a better and faster means of transacting and payments, Ethereum has several more features that BTC lacks. For example, you can develop smart contracts on the Ethereum blockchain, something that’s very important for a digital future.
Ethereum 2.0 Phases
The upgrade to Eth2 isn’t that simple. It will be performed in phases.
- Phase 0: Beacon Chain – operational. The Beacon Chain is the Eth2 native blockchain. You can already send ETH from the Eth1 main chain to the Beacon Chain to stake and even track everything on ETH2 explorer.
- Phase 1: Shard Chains. 64 shards will be deployed. This will improve the scalability of the network by dividing all the work into sharded chains.
- Phase 2: State Execution. Shards will become valid chain structures; Execution Environments will be introduced; eWASM based virtual machines will be introduced; developers can develop dApps on a particular shard; and more.
Phase 0 is already operational. The timeline for Phases 1 and 2 isn’t solidified yet. After Phase 2 is finished, Eth1 will work as a subsystem within Eth2, and will naturally die out. Transfer of funds will not be compulsory but sending your Eth1 balance to a wallet that enables Eth2 functionality will be recommended.
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