Eth 2.0 is to launch in August

• The upgrades of the Ethereum network will reach a significant milestone by August this year, with the merging of the Beacon chain with Ethereum Mainnet marking a switch to a proof-of-stake consensus mechanism.
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• The upgrade of the Ethereum blockchain to Eth 2.0 involves creating the Beacon chain known as phase zero, merging the Beacon chain with Ethereum Mainnet and introducing shard chains.
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• The merge will lay the foundation for shard chains and increase transactions from 15 TPS to nearly 3000 TPS.
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• The adoption of the proof-of-stake model will expectedly reduce the energy expenditure from mining in the proof-of-work system while allowing people to participate using different devices (mobile and others) instead of the high energy-consuming hardware.
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• As part of the preparatory upgrades for the full launch of the Eth 2.0, the improvement proposal EIP 1559 introduced last year laid the foundation for ETH to become a deflationary currency.
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• This Upgrade will cause the burning of part of the transaction fee & it will potentially reduce the supply of Ether and boost its price- a process experts believe will be complemented with the move to proof-of-stake.

Ethereum Core developer Preston Van Loon has hinted during the Permissionless conference that the merge of the Beacon chain and Ethereum mainnet could take place in August this year. The two are currently running parallel systems while the Ethereum mainnet is still using the proof-of-work model. Beacon chain was built on the proof-of-stake mechanism. The integration of the layer 1 Ethereum Blockchain as the "transaction layer" with the layer 2 Beacon chain as the "consensus layer" is phase 1 of the launch of Eth 2.0, also known as serenity. This upgrade, which has been postponed several times, aims to achieve a more secure, more sustainable, scalable, and greener Ethereum.

Eth 2.0 is not a new network but an upgrade to the Ethereum blockchain planned in phases. The phase zero was the launch of the Beacon chain in December 2020, which serves as the consensus layer and marks the beginning of the transition from proof-of-work to the proof-of-stake mechanism. The Ethereum blockchain, just like Bitcoin, operates proof-of-work from inception, where the network is secure through the activity of miners who solve complex computational puzzles to create a new block or approve a transaction. The chance to successfully solve the puzzles and earn a reward in this system is based on computational power, which encourages miners to invest in high energy-consuming hardware to better their odds and compensation. This current consensus system has made Ethereum have a high energy footprint with an annual energy expenditure nearly that of Finland.

The Merge And What It Implies

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The Beacon chain, which is to serve as the foundation component for the secure, sustainable and scalable Ethereum, currently runs as a parallel chain which does not communicate directly with the Ethereum mainnet. At present, It does not support smart contracts and other applications. The merge proposed for August 2022 will integrate the Eth 1, the current Ethereum Blockchain, with the Beacon chain. Beacon chain will inherit from this merge the ability to run smart contracts, which will be introduced into the proof-of-stake system with the entire history and the current state of Ethereum.

In the new system, miners will be replaced with validators who stake their Ether to keep the network secure in an environmental-friendly system. With this development, miners will likely invest their earnings into staking in the new system.

Significant Features Of Eth 2.0

• 1. It replaces the proof-of-work with a proof-of-stake consensus mechanismIt
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• 2. replaces miners with validators who stake their ETH to secure the network
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• 3. It is aimed at the three essential goals of sustainability, scalability and secure network.
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• 4. It requires a minimum of 16 384 validators allowing for greater decentralization.
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• 5. It eliminates the high energy use in proof-of-work while not compromising security and decentralization.

Staking In Eth 2.0 And How It Works

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Staking in Eth 2.0 is earning ETH by depositing a certain amount of ETH required to become a validator. There are currently 13, 047, 461 ETH staked by 389,122 validators. The Beacon chain introduced a validator software that is used for staking. The process of staking involves depositing 32 ETH to activate the software. A validator stores data, validate transactions and adds a new block to the blockchain. The ETH will yield some returns for the validator as a reward for participating in securing the network. This yield, however, is currently low, sitting at 4.3% compared to Solana's 5.41% and Terra's 5.96%. There are also some functionalities, such as the process of withdrawing staked ETH, which is yet to be made available.

How Does Proof-Of-Stake Make Eth 2.0 More Secure?

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The proof-of-stake implies that the validators deposit their ETH as collateral against dishonest behavior; hence, they commit to keeping the network safe and secure. As the number of ETH staked increases, an attacker will have to control the majority of 51% of the total amount bet in the network to carry out 51% of the attack, which makes the odds relatively high. The proof-of-stake incentivizes honest and active participation while placing some cost on the failure to actively perform the validator's duty, resulting in some of the staked assets leaking away. More importantly, the deterrence for a failed attack on the network is high in proof-of-stake. While in proof-of-work, a failed attack only costs the attacker the enormous amount of energy expended during the hashing; in the new proof-of-stake system, the attacker loses the total amount of ETH used as collateral.

Greener Ethereum And Sustainability

The major criticism against proof-of-work is the high energy consumption which Ethereum Foundation has described as not sustainable. The annual carbon footprint of Ethereum is currently similar to Switzerland, while the annual energy consumption is similar to that of Finland. The use of high energy-consuming hardware is also a factor that raises the bar of participation. This is another aspect that the integration of the Beacon chain's proof-of-stake with the mainnet and phasing out proof-of-work will address. Staking, unlike mining, will make it possible for people to participate using simpler devices, thereby reducing energy consumption by 99%. The environmental-friendly system is expected to promote adoption.

The Future Of Ethereum And Scalability

Scalability as part of the aims of the Eth 2.0 is planned to be achieved in the last phase in 2023 with the introduction of shard chains. Scalability borders on the growth of a network while maintaining transaction speed, efficiency, and output. Mostly, it is difficult for a network to achieve scalability and decentralization without sacrificing security. This, perhaps, explains the part why the Eth 2.0 is done in phases and why the scalability through the shard chain is kept for the last phase. Sharding is the breaking of transactions that run on the blockchain up into more manageable sets of data so that more transactions can take place without congestion. The shard chains increase transaction speed by extending the network to 64 blockchains. To ensure the network's security, the Beacon chain will make it difficult for stakers conspiring to take over a shard by randomly assigning stakers to validate shard chains.

Eth 2.0 is a seismic change in the Ethereum ecosystem. The new changes being implemented coupled with the EIP 1559 may well result in a spike in the value of ETH. Since EIP 1599 in August last year, which mandated the burning of some part of the base fees, more than 1.7 million ether coins worth upward of $4.5 billion have been burned. As the burn rate of ETH gets higher than the issuance of the token, ETH will become a deflationary currency with a limited supply, thereby boosting the price.



Author: Gate.io Observer: M. Olatunji
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