Ethereum, arguably the most popular cryptocurrency after Bitcoin, is getting a big upgrade. It’s called Ethereum 2.0, and it will be closer to the original vision that co-creators Vitalik Buterin and Gavin Wood had for Ethereum.
The creators hope to build a system that connects people directly through a powerful decentralized supercomputer. They can provide this with the new upgrade while also making it more scalable, secure and sustainable.
The new upgrade will exist independently. It will start off as a new blockchain with its new set of validators processing transactions with Proof-of-Stake. It will eventually go on to expand by absorbing the old blockchain. We will further explore the new system later in the article.
There’s no denying that Ethereum’s arrival in 2015 created a boom in the power of blockchain. We saw more possibilities and strived to achieve greater things with its blockchain network. But then, why does it need an upgrade? What changes will it bring? And how does it affect its current users? In this article, all these questions and more will be answered.
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What is Ethereum 2.0?
The new Etheruem 2.0, also known as Serenity, will exist on a whole new blockchain. Built from scratch, Serenity will enhance the capabilities of the current Ethereum blockchain and work towards bringing to life its creators’ dream of a totally decentralized financial (DeFi) network. Unlike its predecessor, serenity will be much faster and can handle more transactions per second.
The Serenity testnet was launched on Dec 1st, 2020. Ethereum 2.0 will slowly finish its complete upgrade over the next few phases. It will bring a lot of interesting features such as slashing and sharding. Most interestingly, it will give its users the chance to earn a passive income.
To improve efficiency and increase scalability Ethereum 2.0 will also be using a Proof-of-Stake (PoS) algorithm instead of Proof-of-Work (PoW). All these changes will collectively bring to life a promising new Decentralized Financial (DeFi) system. But, to understand what exactly called for these changes, we must first know how the old Ethereum platform works and see all the challenges it faced.
What is Ethereum?
Ethereum was launched back in 2015. It is a global, open-source platform for decentralized applications (DApps). Its presence changed how blockchains worked so far. The introduction of smart contracts was vital to that change.
To maintain its blockchain, Ethereum created Ether (ETH). It is currently the second-largest cryptocurrency after Bitcoin. Ethereum used Proof-of-Work to record all the transactions that ran on its blockchain. It gained popularity very quickly.
Ethereum soon had plenty of games, decentralized exchanges, and finance apps running on top of its blockchain. Moreover, new tokens too began emerging from the Ethereum blockchain.
Ethereum was recognized as a grand platform in its prime. However, it still faced many issues, more so, once the platform gained more users.
One of the greatest challenges it faced was when a massive number of users joined the blockchain. This led to more transactions which meant slower transactions at a higher fee. While this was already a great cause for concern, the real call for a better system was clear after seeing the devastation brought on by the game Cryptokitties.
Was Ethereum 2.0 necessary?
Ethereum could only transfer up to 15 transactions per second. Though this transaction speed is much faster than Bitcoin’s, it wasn’t enough. When the DApp game, Cryptokitties hit the Ethereum blockchain it became very clear that the blockchain was struggling.
Players could create, trade, and collect digital kittens. During its peak, transaction fees skyrocketed. Every single action on the game was a transaction on the blockchain. And every transaction had to be processed. Hence, pending transactions increased by sixfold.
There was no denying that scalability was a real issue here. Ethereum’s creator realized that one of the best ways to solve this issue was to switch from Proof-of-Work (PoW) to Proof-of-Stake (PoS). This would address scalability, free up congestion, and ultimately reduce transaction speed and fees.
What does Ethereum 2.0 offer?
The creators want to ensure that Serenity will have a stable network where all validators will be verified, rewarded, and penalized. A system that can truly hold accountability and transparency over a decentralized system. Not to mention, having a Proof-of-Stake algorithm in place means a better choice for sustainability.
Serenity’s blockchain will be quite different from the original. For instance, the original used PoW, Serenity will be using PoS. Ethereum 2.0 will be allowing its users to join the blockchain as validators. Each validator will stake some of their ETH to join the new system.
The validators will process every transaction on the blockchain. For the first time, Ethereum will reward and punish its validators based on their performance. Every users’ staked ETH is at risk. If a validator allows a fraudulent transaction, then some of their ETH will be slashed. This slashing penalty will ensure smooth and accurate records.
As for rewards, PoW allowed miners to earn new ETH. That ability to earn more coins is not lost on Serenity. The new system comes with the chance to earn a passive income. Once validators have staked their ETH, they will eventually be rewarded with more over time.
Another pro in Serenity’s blockchain is Sharding. This is another take on boosting speed and efficiency on the blockchain. Ethereum 2.0 will divide and store all the data existing on its every node onto multiple shards.
So, each node will be randomly assigned to a cluster of different shards. These shards will collectively hold parts of the data sent from the main node, now known as the beacon node. Every time the beacon node gets a hold of new data, the shards too will be updated accordingly.
To prevent losing a corrupted shard or node and facing data loss, every node will be randomly assigned to multiple clusters of shards. These shards will also be updated regularly. This idea of dividing data into shards will increase transaction speed tremendously.
Ethereum vs Ethereum 2.0
So, why upgrade, and which one wins? Seems like a total no contest now doesn’t it? Serenity took every issue that Ethereum has faced so far and has an answer to them all.
With Staking and Sharding in place, Serenity has resolved the congestion and speed issue faced by the old Ethereum network. The new blockchain will be much faster and can carry out a lot more transactions than ever before.
By switching to PoS, it didn’t even take away the miners’ ability to mine new ETH. Instead provided a creative solution by having users earn a passive income. Therefore, keeping a secure and legitimate check over all the transactions made on the new blockchain.
What happens to the old Ethereum Blockchain?
So this is all a lot to take in, a new independent blockchain has shown up. New validators will run the system. But what happens to the existing miners and all the DApp users? What happens to the ETH some of us are holding right now?
Well, the answer to that is — nothing. The shift to Serenity doesn’t really affect non-developers. New developers can join the new blockchain by staking ETH they may already own or have since bought. Similarly, ETH miners from the old blockchain will simply retire their miners and stake their earned ETH to join the new blockchain as validators.
What about the existing tokens, DApps, and ETH holders? In its later phases, the old blockchain will simply meld into Serenity. All the data existing on the old network will integrate with Serenity’s infinite system of beacon nodes and shards. So ETH holders have nothing to fear. Even if they don’t choose to migrate onto Serenity sooner, they will eventually make their way.
As for tokens that started on Ethereum’s blockchain, most have already gone on to exist within their blockchains. The migration doesn’t affect them at all. Besides, when new tokens begin to launch from Serenity, they shall bask in its new upgraded benefits.
When will Ethereum 2.0 be fully ready?
Serenity is tentatively expected to reach completion in the next 2-3 years. It will depend on how long each phase takes to run its tests and provide a complete working environment. So far, Serenity has launched its testnet — phase 0.
The testnet was launched on Dec 1st, 2020. At this phase, Serenity is simply trying to reach a set number of validators and stakes. It will begin implementing Proof-of-Stake. But, it cannot begin rewarding its validators yet, not until it reaches its goal of 16,384 validators.
These validators will attest blocks on the new blockchain. Although they will all stake a share of their actual ETH, they cannot receive rewards until the blockchain hits at least 524,288 ETH from the validators alone.
Phase 0’s, main focus is to establish the beacon chain and gain validators. Serenity is currently unable to process actual transactions, execute smart contracts, or host any DApps. It is simply a testnet that aims to prove PoS is functional and the right choice to carry Serenity.
Establishing the beacon chains takes priority, for they are fundamental to get started with the next phase. Beacon chains will be the central link to shards, which is what the next phases are all about.
Phase 1 will go live sometime this year. This phase will focus on introducing shards into the system. Validators can begin to create blocks through Proof-of-Stake. The Ethereum blockchain will be split into 64 separate chains. These shard chains will operate seamlessly with their beacon chains.
With all these new shards interconnecting data within the system, scalability is no longer a dream. Ethereum can finally process thousands of interactions at a time. The next phase is a little bit more challenging.
Phase 1.5, here is where things get interesting. In this phase, Serenity will integrate Ethereum’s old mainnet into its new blockchain. All of the old data will turn into beacons and shard chains. It will also start its transition from Proof-of-Work to Proof-of-Stake.
The old blockchain will begin to exist as one of Serenity’s 64 shard chains. This means all ETH holders can easily interact with the newly upgraded blockchain without having to deal with any token swaps or transfers.
The final stage is in phase 2. Serenity has completed all its tests and trials. It is now ready to perform. The chains are fully connected, transactions processed, smart contracts at the ready, and DApps fully functioning. The show has begun and Ethereum 2.0 is fully ready.
What happens after this phase, is completely in the air. We may see more opportunities for improvement, or we may see a wild range of wacky new ideas. Reaching phase 2 alone could take longer than anticipated. All we can do is wait for the magic to unfold.
How to join the new blockchain?
If you want to be a part of this amazing venture, then count your ETH and join the revolution as a validator. Below are the steps to how you can do so.
First, you must own a total of 32 ETH. If you have accumulated this amount, either through mining or purchases, doesn’t matter, you’re ready. Simply take your 32 ETH and stake it on the Ethereum 2 blockchain.
These funds will act as a guarantee, promising honest and accurate transactions on the blockchain. Over time, you will be rewarded for staking your ETH by earning a passive income once the whole blockchain is complete.
Next, you must set up your Ethereum Validator Node. Every validator node will be crucial to staking. Each node will confirm transactions and record data. These initial validators will act as beacon nodes, they will eventually anchor thousands of shard chains.
Besides staking ETH and running a client, you will also help track down bugs on the blockchain. The launch of phase 0 is precisely to do that. Gain enough validators to run the new system and ensure that the new system runs smoothly.
Find bugs and earn up to $50,000 rewards. Each bug reported puts validators higher up on the leaderboard. Bugs can be found either on Serenity’s upgrade specifications or the clients themselves.
In conclusion, Serenity’s vision is to provide a foolproof new blockchain technology. One using Proof-of-Stake, to provide much faster transaction speed by adopting sharding. It is still in its first phase of testing and hopes to reach completion over the next couple of years. Serenity will have so much more to offer. It will be very exciting to see how much progress Ethereum will see in Serenity’s final stages. There is no denying that this is an iconic moment in cryptocurrency. Everyone is excited to see the creators’ original vision for Ethereum finally coming to life.