Ethereum 2.0 is to be launched soon, This upgrade is the technology and multi-year roadmap intended to transition the world’s second-largest blockchain by market capitalization from PoW to PoS. Although, we know that Eth2 is a long-planned upgrade to the Ethereum network, majorly focus to enhance its scalability and security.
Ethereum 2.0, also known as Eth2 or “Serenity” which is by far the most ambitious and radical change to be implemented on the network or A shift from Proof of Work to Proof of Stake consensus algorithm. The Ethereum 2.0 is especially significant compared to past upgrades because of the implementation of a POS consensus mechanism, moving the network away from POW architecture.
Scalability is the main reason for upgrading to Eth2. With Ethereum 1.0. Earlier, the network can only support around 30 transactions per second which causes delay & congestion. Ethereum 2.0 promises up to 1,00,000 transactions per second, also more secure. Most Proof of Stake networks have a small set of validators, making a more centralized system and decreased network security. It requires 16,384 validators, making it more secure and decentralized and has improved scalability by its implementation of sharding. Since PoW suffers from scalability and accessibility issues. PoS replaces it with validators and stake.
Shard chain in ethereum 2.0 store and process transactions. These shard chains are an important part of increasing the number of transactions ethereum can handle per sec. As per official beacon chain statement, Ethereum 2.0 will support 1024 Ethereum shard chains, each of which will be secured by a committee size of 128 validators. It is also important to note that transactions are only executed and validated within a shard, and that state is only stored at the shard level. These beacon chains to make sure every shard has the most up-to-date data with the help of validators who communicate the state of shard chains to the beacon chain. Like, this shard chain helps the network enhance performance in transactions scalability and securities.
We know that, Staking is the process of holding a certain amount of Eth to support the network and get rewards in return. In ethereum, we use proof of work algorithm and here in ethereum 2.0 we use proof of stake algorithm. If an individual stakes 32 ETH in their wallet ,they will become a full validator. For staking validators will be rewarded with ETH. If the ETH holder is unwilling or/and unable to stake 32 ETH they will be elected to use a staking pool, which will combine the funds of others and stake on their behalf. Pool participants will receive rewards as a percentage of their contribution.Ethereum 2.0’s consensus mechanism has a couple of rules that are designed to prevent attacks on the network. Any validator found to have broken the rules of the network will be slashed and ejected from the network.
The early assurance of Ethereum was to create a decentralized world computer which would execute anyone’s code in exchange for a fee, from running a token sale to distributing loans. People don’t need to do anything because Eth2 will be compatible with the main Ethereum network which people use today. Like that, they introduced enriched features for the DeFi platform in Ethereum 2.0 which makes great interests for DeFi innovators to get involved towards decentralised finance activity. Also, It creates a fairer playing field which allows lower barriers to stake and trade ethers. Like, ETH bonds and more were introduced in Ethereum 2.0 for more future DeFi engagement.
Finally will Ethereum 2.0 replace Ethereum? Actually no. The present POW chain will run in parallel to the new POS shard chains. Also, New Ether issuance will take place on the shard chains, and it will be possible to transfer ETH from the POW chain to a shard chain. POS and sharding will bring considerable improvements to scalability, security and accessibility. Including staking features for ETH holders concept provides a new opportunity to participate and receive rewards for maintaining the network. For those who wish to run their own validators with 32 ETH, use a third party provider to stake their 32 ETH, or pool their funds with others, the Ethereum ecosystem will host a number of products and solutions also Eth 2.0 will change the Defi ecosystem
Check out this article on Layer2 Rollup solutions that can reduce the gas fees and facilitate the ethereum mainnet transactions thereby increasing the transaction speed more effectively. read more...