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Ethereum 2.0, Everything You Expect of A Blockchain

From its initial launch in 2015, the Ethereum blockchain has introduced several protocol upgrades. The last and most major upgrade was launched in December 2020, known as Ethereum 2.0, or Eth2. This new protocol holds high expectations for the future of the smart contract platform in the years ahead.

Ethereum blockchain is the most actively used blockchain, and it is the primary choice for developers to create their blockchain-based applications. Ethereum’s native cryptocurrency, Ether, has the second-largest cryptocurrency market capitalization, after Bitcoin. In its roadmap, Ethereum has planned for continuous evolution to a Proof-of-Stake (PoS) protocol, and Ethereum 2.0 is the latest upgrade and innovation of this network.

Many users and industry sectors are increasingly adopting blockchain in their daily life and business. For example, the finance sector is gradually moving towards decentralization, and it has been mainly built on top of Ethereum. However, this increasing number of users has put blockchain under some pressure, and as a result, the transaction fees have increased significantly. In addition to transaction costs, the network speed also slows down as the number of users increases. These barriers motivated Ethereum’s developers to upgrade the network, resulting in the launch of Ethereum 2.0.

As Ethereum 2.0 is developed to overcome the Ethereum blockchain’s limitations, there are high positive expectations for the future of this project. But how does Ethereum 2.0 work?

Ethereum 2.0

Ethereum 2.0 is a set of interconnected upgrades that are built by several teams from across the Ethereum environment. These upgrades’ purpose is to make the Ethereum blockchain more scalable, secure, and sustainable. The upgrades will improve the speed of the blockchain by supporting thousands of transactions per second while costing fewer transaction fees.

As discussed in our article, What Is Staking, the proof-of-work (PoW) algorithm is highly energy-intensive and requires a substantial initial investment in computational hardware. On the other hand, proof-of-stake (PoS) is an energy-efficient algorithm and does not require mining hardware.

To deploy the PoS mechanism on the blockchain protocol, Beacon Chain was launched in December 2020. This chain operated based on PoS instead of an energy-intensive PoW consensus mechanism. In the PoS algorithm, users can become a validator of the network by locking some coins or staking. In Ethereum 2.0, users have to stake 32 Ether (ETH) to become a full validator. The PoS will randomly select a validator to verify transactions and build the next block on the chain. The PoS algorithm ensures the security of the blockchain by possessing those validators’ stakes who show dishonest or malicious behavior.

The next plan of this project is to launch shard chains for Beacon Chain in order to increase the network’s transaction speed. Simply put, sharding split up a database to spread the workload. Therefore, network congestion will decrease, and the network’s speed won’t slow down by increasing the number of users. Moreover, less hardware equipment will be required for operating a single node. It is planned for 64 shard chains to be created in the year 2021.

Another benefit of the shard chain is lowering the workload for validating the Ethereum blockchain. The Beacon Chian can spread the needed work by assigning a certain shard chain to several validators. The shard transactions are then combined with rollups and submitted back to the main chain. This will improve the speed and transaction capability of the Ethereum blockchain.

How did users respond to Ethereum 2.0?

There are several people who are working on the Eth2 project. Cointelegraph has interviewed some of the key figures of this upgrading project. Ben Edgington is one of those key figures in Eth2 development. He is the lead product owner of Teku, an Eth2 client created by ConsenSys and designed for enterprise and institutional stakers.

The rules of the PoS mechanism must be set by developers. One of the important rules of PoS is the amount of coin staked in the blockchain contract, which is currently 32 ETH for Ethereum 2.0. Ben Edgington has explained to Cointelegraph that they have experienced positive participation in staking ETH from users:

“The amount ETH already staked is an immense vote of confidence, not only in the Beacon Chain, but also in the future of Ethereum. I am impressed by how much has come in so quickly, and greatly encouraged by the commitment of the Ethereum community to what we have built, and will be continuing to build.”

He also mentioned the Beacon Chain’s launch as the most challenging part of the project, and its initial success has already made developers highly optimistic about the future of Ethereum.

Another team member of this project also mentioned the overwhelming support from the community. Viktor Bunin, a protocol specialist at blockchain infrastructure provider Bison Trails, told Cointelegraph:

“I was surprised that the inflows have continued to be so large and think there’s a chance that the queue to enter Eth2 does not run dry for all of 2021, meaning there is always a wait for a validator to join the network because so many are trying to join simultaneously.”

What do specialists think of Ethereum 2.0?

Joseph Lubin, the ConsenSys founder, is very optimistic about the future of Ethereum 2.0. He suggested that the Eth2 project can go from Phase 0 to Phase 1 much faster than expected. “People in the know around the ecosystem are very optimistic about how fast things could unfold, as the really complicated work has been done in launching Phase 0,” Lubin said during the “Ethereum in the Enterprise — Asia Pacific 2020” conference.

Lubin referred to the sharding system of Ethereum 2.0 and predicted that “Eth2 could absorb Eth1 in the not too distant future.”

Vitalik Buterin, the Ethereum co-founder, explained the network’s ongoing upgrades and developments in an online interview posted on YouTube by Ethereum Buenos Aires in late December 2020.

He pointed out the primary goals of the Ethereum network for the year 2021. The main concern is transaction fees on the blockchain. “We need to be working very hard on making sure that there’s more space for transactions so that we don’t have this dynamic where everyone is bidding for a very small amount of space so that only very few transactions can get in,” he said during the interview.

He also mentioned the long-term goal of the Ethereum environment, which is the ability to support hundreds of millions of users. The Ethereum 1.0 can only support 15 to 45 transactions per second, which is not adequate enough for such an expected large number of users. However, the launch of Ethereum 2.0 can bring the Ethereum environment closer to its long-term goal. The sharding and rollups of Eth2 will allow the network to process 25,000 to 100,000 transactions per second.

He closed the interview with his expectations of achieving the Ethereum roadmap goals by the end of 2021. He explained that they expect to complete the development roadmaps of Eth1 and Eth2 to prepare for the complete integration of the two chains. “Potentially, the light client supports for the proof-of-stake chain even before the merge could be used to provide better light client support for the proof-of-work chain,” he added.

Ethereum 2.0 is not just about the speed

The developer teams have been concern about the quality of the final product from the beginning of the project. They have developed the Beacon Chain with a great focus on building upgrades without rushing the process.

Viktor Bunin told Cointelegraph that although many users, developers, or companies were frustrated by the long period it took to launch the Beacon Chain, they were happy by the news of the launch:

“They did not take shortcuts with the Phase 0 design and were not afraid to go back to the drawing board after failed attempts or upon discovering new optimizations. They will and should continue to optimize for the best design rather than speed of execution.”

Edington also said that he was hoping to achieve and launch shard chains at the end of 2020, but it will be dependent on the sheer scale of work to be done in 2021:

“The design for sharding is well advanced and I expect we’ll make excellent progress towards implementing it this year. I’d personally hope to see shard chains launched in 2021, but we don’t yet have a target date. In addition, we have brought forward the merger of Eth1 and Eth2 in the roadmap, so we will be working on that in parallel with sharding.”

The growing community of Ethereum users has already put a lot of pressure on the blockchain. Some DApps, such as DeFi, are increasingly attracting more users, so the pressure will constantly increase. However, Edington repeated the developers’ approach to upgrading. “There’s always been a sense of urgency, irrespective of DeFi! […] The tension between doing things right, and doing them quickly is always present, but I feel that we are in a reasonable place,” he said.

“They are building the financial infrastructure of the next century,” Bunin said in supporting developers’ approach of concentrating on the quality. He added: “My expectation is that shard chains will be launched by the end of 2021, but I am also comfortable if they are delayed.”

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