Ethereum is the second most valuable cryptocurrency just after Bitcoin. Unlike Bitcoin, Ethereum is not just a currency. Its blockchain platform can work as an infrastructure platform that can be used to perform a number of economic tasks.
The blockchain network of Ethereum is spread across thousands of computers all around the world. These computers are also called nodes and are responsible for validating all transactions happening on the network.
Ethereum is also Turing complete, which means smart contracts on Ethereum’s blockchain can handle most data processing happening on the network.
But there are problems with Ethereum!
The explosion in the popularity of crypto, as well as Ethereum and its ability to be used as an infrastructure for dapps and other platforms, has overwhelmed Ethereum’s platform.
Ethereum is viewed as a utility platform, so due to the increased load on its network, it runs out of disk space required to execute the Ethereum client which is resulting in transactions taking longer than usual.
High demand is resulting in the rise of transaction fees required to use the platform, making it expensive for an average Joe to use the platform.
Just like Bitcoin, Ethereum uses a proof of work(PoW) model that keeps Ethereum’s network secure and decentralized. The energy consumption to keep the network secure and decentralized is too high.
According to a report by Digicomist, Ethereum’s blockchain consumes an energy equivalent of Hong Kong to run its network which can have a big environmental impact.
These problems are concerning for the future of Ethereum and the community always expected few upgrades that are necessary to unlock Ethereum’s full potential.
Ethereum’s community and its developers are aware of this problem and have come up with solutions.
Introducing Ethereum 2.0
Since its launch in 2015, Ethereum’s blockchain has had incredible success in terms of utility, being used as a currency as well as a platform for other tokens, Dapps, NFT’s, and much more.
Ethereum 2.0 or Eth2.0 is the set of upgrades for Ethereum’s blockchain which is expected to solve the problems faced by Ethereum’s current network.
Ethereum 2.0 is going to improve the scalability, security and sustainability of Ethereum’s blockchain. These updates have been broken into three phases:
Phase 0: The Beacon Chain
Phase 1: Shard chains
Phase 2: The Merge
More phases will be added if required.
Although developers are working on each of these in parallel, they have certain dependencies on each other that determine when they will be deployed.
Let’s briefly look into what these three updates are and when they are going to be launched:
Phase 0: The Beacon Chain
The beacon chain is said to be the core of Eth 2.0’s blockchain system and will act as its backbone.
With the beacon chain, Eth 2.0 is going to introduce the proof of stake(PoS) consensus algorithm, which has been a long part of Ethereum’s roadmap.
Currently, Ethereum uses a proof of work(PoW) algorithm to validate transactions on its platform.
PoW consumes a lot of power in order to run transactions which leads to a lot of precious resources being wasted.
It is also susceptible to 51% attacks where if an entity owns 51% or more nodes on the blockchain, it can control the blockchain.
The Beacon chain will be run by a group of validators. To become a validator, you’ll have to put some stake into the smart contract on the current Ethereum blockchain. The minimum Ethereum you’ll have to stake is currently 32 Eth.
An algorithm will randomly choose the committee of validators while ensuring that it is mathematically impossible that anyone can take control of the committee.
Validators will be given incentives in the form of Eth for maintaining the workflow and for any malicious activities detected or not performing its duties they will be penalized.
This upgrade went live in December 2020.
Phase 1: Shard Chains
In the world of computers, sharding is the process of splitting a database to spread the load. When launched it will reduce Ethereum’s network congestion and increase transactions per second by creating new chains known as “shards”.
This eventually allows you to run Ethereum clients on laptops or phones as a node. This a really good way to scale while keeping things decentralized as the current alternative is to scale by increasing the size of the existing database.
With shard chains, validators will only need to store/run data for the shard they are validating and not for the entire network. This increases the overall speed of the network drastically while reducing the hardware requirements
With lower hardware requirements, sharding will make it easy to run clients on your mobile or laptops, without consuming many resources or any intermediary services.
The upgrade is expected to go live sometime in 2022
Phase 2: The Merge
Currently, Ethereum is secured by proof of work. The beacon chain that was launched last year runs in parallel to the current Ethereum network.
The merge is when these two systems finally come together.
Ethereum’s main network will bring the ability to run smart contracts into the proof of stake system of the beacon chain along with the full history and current status of Ethereum, ensuring a smooth transition for all Eth holders and users.
The merge will signal the end of PoW for Ethereum and will start the era of a more sustainable, scalable, and eco-friendly Ethereum.
With the upgrade, Ethereum will also replace EVM with eWASM which will make it possible to execute Ethereum’s code right in today’s web browser.
This opens doors for more users to be able to develop Dapps on Eth 2.0 without the need to learn Ethereum’s native language.